The problem arises on a personal level when people get used to using their plastic to indulge their whims, and then run up balances they can't comfortably manage. And it arises for whole economies when too many people do that.
Here's an idea…
On Mar. 5, Capital One unveiled the findings of a poll it commissioned into taxpayers' plans for their federal tax refunds, which this year look set to average $2,805. Thirty-five percent say they're going to spend all or part of their refund. Of those:
- 23 percent intend to take a vacation
- 16 percent clothing and accessories
- 15 percent electronics
That's absolutely fine for those to whom debt is no bother. But paying down by $2,805 a card balance that's attracting 16.82 percent APR (the average credit card rate at the time of writing) could save someone close to $500 in interest alone over the next year -- more, if they use that savings to pay down their balances further each month. That's generally not as much fun as a vacation, but it's worth thinking about.