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February 15, 2010 • Posted by Michael Ferrari

Credit Card Use Plummeting: Common Sense Soaring!

SmartyPig Just Say No

Call them old fashioned if you wish, but the number of people who just say “no” to credit cards has taken off, leaving in its wake new credit card data that suggests people are either smarter, more afraid or banks are still shying away from extending credit. Whatever the case, whatever is happening is working.

In a recent article about the slowing of credit card usage, USA Today shows us that “Revolving credit – largely made up of credit card debt – fell by nearly 20% in November, and that through October, the number of new credit card accounts was down 46% from the same period in 2008. Those numbers are staggeringly strong. What gives? People simply aren’t up for the abuse at the hands of big banks anymore who will jack up rates at customers’ most vulnerable points.

Sandra Block, the reporter for USA Today spoke to young people who are anti-credit card. What they had to say was as educated as it was eye opening. Why the drop in card usage: It’s a “hassle.” It leads to “huge debt.” It’s not a “rite of passage into adulthood.” It’s “not worth it.” And what do they get in return for keeping the faith and staying true to themselves: “Fewer bills, headaches and fears.”

We here at SmartyPig believe credit cards should be avoided for now, that people should save up of the things they want, take the same route their grandparents did and sock money away – especially in such a troubling economy, and not just for a rainy day. Vacations, electronics, new clothes, necessities, all can be done smartly and without risk.

While credit cards can be useful to build credit, we think people, especially younger people, should probably wait. After all, the difference between bad credit now and good credit later might be as easy as saying no to credit cards until you’re ready. Or as the young Block interviewee Emily Maddox says: “I’ve known people who have had credit cards, and I’ve seen what can happen if you get behind and how hard it is to get out of debt. I don’t like owing people money.”

Mike Ferrari, SmartyPig co-founder
@mferrari

  • James Cook

    Responsible use of a credit card is perfectly fine; however, few people embodied the necessary discipline to spend within their budget and pay off the balance each month. I enjoy numerous rewards from handling my essential spending via a credit card. Admittedly, the waters have become more hazardous as card companies find new ways to fleece holders after implementation of recent legislation. I will continue to use this method of payment so long as annual or other pesky fees do not emerge.

  • http://www.sugarfixjewelry.com Kate

    I have to admit, I’m a part of the “young people who are anti-credit card.” Again, I understand the need to build credit and I have when I got and already paid off a student loan, but I’m just not interested in one right now. Plastic is too easy for me so I tend to stay far away from it.

  • Sarah

    I finally cancelled my credit card after Chase sent a letter saying they would increase my APR to 30%. I said “no way” (well, not so nice as that) and told them to lower my interest rate and cancel my card. They lowered it to 15%, which is at least a little better than 30%, and I have automatic payments at an amount that I can afford. It will take about 4-5 years to pay off debt, but at least it is a light at the end of the tunnel. I’ve really paid my debt many times over, but the interest rates are ridiculous and prevent people, who like me fell on hard times and had to rely on credit cards for awhile, from ever making headway. Now I’m back to being resourceful and managing my money more responsibly. It’s very liberating.

  • Chris

    I personally use credit cards to my advantage and pay them off every month, but it does take discipline and if you don’t have it, it can be very costly, so I think it is a great sign. Another great sign is that the savings rate is going up in the US. The people that want us to spend out of this recession might not like it, but this clearly the right direction, the old path to spending more then you make had to stop some time.

    BTW People like Sarah might want to consider dumping the credit card company altogether by going to some place like LendingClub to take out a personal loan at a better rate and faster payoff.

  • http://personalmoneystore.com/moneyblog/2010/02/19/108-build-savings-payday-loans/ Build savings

    Actually I am not really fond of using credit cards and availing loans because tit only adds to my debt. But sometimes you really have no choice but to avail one because it is easy and available for emergency use. But building savings is really much more advisable to do.

  • jsmith

    It will take about 4-5 years to pay off debt, but at least it is a light at the end of the tunnel. I’ve really paid my debt many times over, but the interest rates are ridiculous and prevent people, who like me fell on hard times and had to rely on credit cards for awhile, from ever making headway.

    jsmith
    thanks
    ………………………….
    Best Credit Cards

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