Credit card use is decreasing, while debit card use is on the rise. The culprit may be the hard economic times, but that is not the only factor.
“People are being extraordinarily cautious because of concerns about a double-dip recession, and jobs not being returned,” says a recent USA Today story. “Consumers are opting for debit cards, because they’re ‘one of those mechanisms that allows you to spend what you have.'”
A Federal Reserve Board report states that credit card borrowing fell at a 6.3% annual rate in July and that the last time borrowing with credit cards increased was in August 2008.
I am not surprised by the report and survey’s findings. I put my credit card away about four months months ago and started using only my debit card or cash for purchases. Credit card debt scared me into switching. When I first got my credit card during my freshman year in college, I remember my father sitting down with me to talk about using credit responsibility. I managed to follow his advice of paying of the balance in full when I was employed, but that quickly changed when I stopped working to focus on school. I no longer use my credit card to feed my caffeine addiction. My credit card will only get swiped in case of an emergency and low funds.
I also remember getting credit as easy as as getting a library card. I applied and received my $500-limit credit card without a co-signer. Now, under a specification in the credit card reform bill, most college students can’t get a credit card without a co-signer. As for those with credit cards, lenders are reducing their risk by slashing consumers’ credit limit.
My credit limit has since increased, but using my debit allows me to interact with my money more responsibly. What I like about using my debit card is that I have access to up-to-date information. I can see the dollar amount decreasing instantaneously with a tap of my bank’s mobile app. If I’m not sure whether I have enough money to make a purchase, I can easily check it. Best of all, I can track all my purchases, making it easy to create a budget and stick to it.
Apparently, I am part of a generational shift, as the USA Today reporter calls it, that has many young consumers using debit over credit for similar reasons. Unlike my credit card, my debit card does not have any rewards or incentives, but according to the USA Today story, many businesses are offering customers incentives to pay with cash or debit. My incentive is not having to pay outrageous interest on purchases and avoiding credit card debt.
How has the bad economy changed your credit card use?