The Current U.S. Economy and the Use of Credit Cards

With the current state of the U.S. economy one would think that credit card usage would stop altogether. But for those who still have active credit card accounts, studies are showing that they are used for survival because of the high prices across the board in the U.S. economy. And, the leaders of the U.S. economy would rather have you use those credit cards for luxury items and not items needed to live like groceries. Let’s look at this further.

More Americans are using credit cards as a cash flow tool. A study was done recently that found that Americans are paying their credit card bills before their mortgages. They are going against the suggestions of the majority of financial counselors and paying unsecured debt before secured debt. This is because of a growing reliance on credit cards as a way to pay for essential items like heating one’s home and buying food. To put it another way, utility companies will usually shut off your heat and electricity after two months of missed payments. The cost to heat one’s home in the middle of the winter could be around $500 per month. If you are two months behind and need to come up with $1,000 to keep your utilities on, you are more than likely going to pull out your credit card. It is also for this reason that consumers want to keep their credit card accounts current no matter what.

Americans are keeping their credit card accounts current because of the unavailability of loans. Banks and other lending institutions in the U.S. economy are tightening their belts because of the problems in the sub-prime lending area and the high number of defaults on credit card accounts. Those who can’t keep their credit card accounts current are just letting them default.

Americans are not using credit cards for high-priced discretionary items. It gives further indication that the current situation for most families in the U.S. economy is to do whatever it takes to survive.

Leaders in the U.S. economy are sending the wrong message to consumers. It seems that the overall message should not be to spend more but to manage money better. Some even debate whether or not there is a recession to begin with. Businesses want to move products from sales floor to consumer homes but to send the message that we need to spend more on these goods instead of spending the money on real needs is the wrong message. Consumers need to be looking at ways to get out of debt and not accumulate more.

The economic stimulus tax rebate will probably not fix the problem. In other words, most Americans will spend the money on paying for their high living expenses and not to buy high-priced discretionary items. That check that most Americans get will go towards buying gasoline or keeping some utility from getting turned off. Any relief provided by this check is probably too little and long overdue.