For some reason, Americans appear to have a love affair with credit cards. We as a society seem to just love racking up debt to big banks, sending our money back to them with loads of interest on top, then having the nerve to complain about how we don’t have enough money at the end of the month.
A new report from the Federal Reserve states that as of December 2018, total credit card debt in America amounted to a staggering $870 billion. That’s billion with a B, folks!
The total amount of credit card debt previously peaked in 2008 in conjunction with the Great Recession but had declined for a couple of years. However, since the Recession has largely made its way out from our economy, and things have been growing at a faster pace for the past three or so years, it appears that Americans have not learned their lesson. Not only have we gone back to our old habits, but we are carrying out those bad habits to even worse degrees now.
Bloomberg notes that there are now over 480 million credit cards in circulation. That’s nearly 150 million more credit cards than people, and 100 million more than were in circulation in 2008.
At the end of last year, credit cards were the fourth-largest portion of consumer debt in the U.S. after mortgage, student loan and auto debt. But the quarterly increase in credit card debt was faster than the other categories. Overall debt reached a record $13.5 trillion.
About 37 million credit card accounts had a 90+ days delinquent mark added to their credit report last quarter, an increase of about two million from the fourth quarter of 2017. These 37 million accounts hold roughly $68 billion in debt that is 90-plus days delinquent.
The good news? Well, there is still plenty of space for you to borrow money and make the bankers even wealthier.
Now here’s an interesting fact. Approximately 30% of the total credit card debt is held by Americans over 60 years of age. Those of us in the pesky Millennial and GenZ category? For age 18-39, we only hold about 24.2%, with those between 18-29 having only 6.8% of the total (hopefully it remains that low and only decreases with time). It’s interesting to see how most of the credit card debt is held by people age 40 and over.
Here’s what all this means folks… It means that consumers have been borrowing money for things they mostly didn’t need or could not really afford, got themselves into a mess with large payments and high interest rates, and are left wondering how things got to be so difficult each month.
This is no way to live, my friends. The American Dream is not to rack up thousands and thousands in debt to big banks and send away large portions of your earnings each month to those institutions. And, no, there is no way to “get” them when using credit cards.
Their rewards programs are not going to turn your life situation around. “Earned” airline miles are not going to make your paycheck stretch further. These companies study our behavior more than we do, and they are very good at getting us to spend more using their product.
No, there’s no “getting” them when you’re still using these products. The only thing that will do that is paying off these cards and never again carrying a credit card balance.
Use debit cards or cash for your purchases. Credit cards simply enable reckless spending, and though there are some people who have the self-control to not spend more with plastic, there’s a reason these cards are so aggressively marketed to us: people spend more with them, and the banks make big money off of our overindulgence.
This message is completely counter-cultural. Most Americans will say it’s fine if you just “use a credit card the right way.” Folks, when 78% of us are living paycheck-to-paycheck, I don’t want to be playing games and taking chances on “using it the right way.” It is far better to simply avoid these debt (yes, debt) cards in the first place, and simply buy only what you can truly afford (tip: if you can’t pay for it in full, you generally can’t afford it in the true sense of the word).
I teach a different way than what the mainstream culture believes, a completely separate path that few are willing to follow. But the ones who do follow it, and avoid massive debt payments for their entire lives, are the ones who can save, build wealth, and afford to do fun things without sacrificing their future.
If you’re ready to do things differently, to get better results in your financial life, let’s talk about how to get that credit card debt out of your life. Reach out today to get started.