Millions of Americans use credit cards; many people use their cards every day. For many people, a quick swipe of the credit card is convenient to complete every day purchases, or use for the occasional treat.
Credit card spending is important for people to build their credit scores, but it is also important for the economy as a whole. According to the Federal Reserve, consumer spending, largely through credit cards, is responsible for maintaining nearly 70 percent of the national economy.
At the same time, the central bank is worried about rising credit card debt, which is also cited as one of the greatest risks to economic stability. Analysts with the Fed state that national credit card debt exceeds $850 billion, though debt levels fell approximately $5 billion earlier this summer.
Americans appreciate the benefits associated with credit cards. In addition to building credit scores, many cards include other perks such as travel reward or cashback points, redeemable at later dates.
But many households appear to have gotten the message that unmanageable credit card spending is unsustainable. Charging items onto the card to collect points or build credit is a fiscally sound choice to make, but only if the balance is paid off each month. If you are spending more than you can pay back, all the reward points in the world won’t change the fact that your credit score suffers.
Sometimes unmanageable balances are the result of consequences beyond your control. For example, job prospects across the country were very slim in the years following the recession. But in August, the unemployment rate fell to its lowest level in 5 years, suggesting more people are working regularly and therefore, should be able to manage their monthly expenditures.
Credit card spending can also be considered a fiscal test, especially for young Americans. If you are capable of paying off what you spend in a responsible manner every month, this habit teaches you how to live on an affordable budget. This skill is particularly important later in life when you apply for larger loans like mortgages.
Credit card spending can provide you access to a number of beneficial rewards, but only if you avoid spending yourself into unmanageable debt.