Americans might be more responsible now than they were in the early 2000s when it comes to the use of credit. At least, that's what the evidence from a Gallup poll taken earlier this year seems to suggest. The Gallup poll, which was based on random telephone interviews with 1,026 adults, shows that a full 48 percent claim to pay their credit card balances in full when the bill comes due. Not surprisingly, the opposite group, those who carried a balance each month, came in at a record low percentage since Gallup began recording this metric in 2001. But the poll went further to reveal more about the secret lives of credit card users in the United States, and how the use of credit affected overall debt levels. For example, it showed that the average American carries 2.6 credit cards on average, but the figure jumps to 3.7 when you remove those who don't carry a credit card at all from the equation. Furthermore, the average American carried $2,426 in credit card debt when this poll was taken. However, exclude those without a credit card and the figure quickly jumps to $3,573. So, what does this mean?"Americans are less reliant on credit cards than in the past. They are carrying less credit card debt overall, own fewer cards, and are more likely now to say they always or usually pay their full balances every month," Gallup summarized earlier this year. "This suggests that credit cards -- a staple of American consumer life for decades -- might not be as vital a financial tool to individuals as they had been in the 1990s and 2000s, when Americans often used their credit cards to make ends meet."That's a good thing, right?Many experts would say yes.
Are Americans on their best behavior since the Great Recession?
Is the Gallup poll really telling us that Americans are on their best behavior when it comes to the use of credit? Say it isn't so.Gallup polls might indicate that trend, but other bean counters and media outlets are taking the opposite stance. According to this MarketWatch article from two months ago, "American credit-card debt hits a post-recession high," Americans are relying too heavily on plastic for day-to-day living expenses. An excerpt: "Americans added $28.2 billion to their credit cards in the second quarter of 2014, the largest amount in the last six years and nearly 200% more than in the second quarter of 2009, when the economy emerged from the depths of the Great Recession, according to new research from personal finance website CardHub.com. After paying off $32.5 billion owed during the first quarter of 2014, consumers ran up roughly 86% more debt during the following quarter."Yikes. It's scary how quickly the tide can turn, isn't it? Although personal credit card debt figures took a nose dive earlier this year, the trend certainly didn't stick around for long. Once again, we're racking up those balances with wild abandon and living the dream. Isn't it grand? <insert sarcasm here>Of course it's not. Most people who have lived it will tell you that it isn't grand at all -- especially when you realize what it takes to pay those balances off. The cycle can be painful -- the realization that you're in credit card debt again, the struggle to pay it off, the elation at your success. The mere fact we see the cycle repeating again shows that any change was, at best, momentary. That's the part many people just don't seem to get.
Drop the cards and break the cycle
Still, there is a way to avoid the credit card debt cycle if you are an avid spender, says CFP Practitioner Katie Ward of YourRichestLifePlanning.com.As a Certified Financial Planner, Ward works with people to develop long-term financial plans that help them meet their goals. And since credit card debt goes against the grain of what most people are trying to accomplish, many of her clients found that, over the years, any benefits they got from the use of credit cards were soon overshadowed by the elephant in the room -- their revolving debt load."Many of my clients that struggle with spending will choose to stop using credit cards altogether," Ward admitted.But she doesn't see that as a sign of failure or an indication that something is wrong. According to Ward, life without credit is just better for some people. "There are two groups that may want to consider discontinuing the use of credit cards," says Ward. "The first group includes anyone trying to pay down existing credit card debt. Second is anyone who could better control his or her spending without the use of credit cards."
Does credit make you spend more?
Several studies indicate that credit cards enable people to spend more than they planned, and Dave Ramsey constantly drives this point home on the radio and on his website. According to Ramsey, using credit for everyday spending is an all-around bad idea.