Credit cards have long gotten a bad rap from some personal
finance experts. They insist carrying plastic in your pocket is the
quickest way to financial ruin and, certainly, when used
incorrectly, credit cards can do major damage to your budget.
However,
new data from the American Bankers Association
indicates Americans may be adopting a wiser approach to credit card
use. Rather than racking up big bills they cannot pay, most card
holders surveyed by the ABA appeared to be keeping their spending
in check and paying their bill on time each month -- so much so
that the number of bank card delinquencies dropped to an 18-year
low in the third quarter of 2012.
Credit card bills getting paid on time, in full
As of the end of September 2012, only 2.75 percent of all bank
card accounts were delinquent. A number that low hasn't been seen
since 1994. The ABA defines a delinquent account as one that is 30
days or more overdue.
In releasing the third-quarter numbers, the association noted
the low number of bank card delinquencies is likely a result of
consumer efforts to
fortify their finances
in the midst of a slow economic recovery.
"Consumers are paying close attention to their finances as they
continue to pay down debt in an uncertain economy," said James
Chessen, ABA's chief economist, in a written statement. "The
conservative approach consumers have taken to credit over the last
several years has allowed them to better manage their debt and
better position themselves for the future."
It's not just seasoned workers who are taking a conservative
approach to credit cards either. A
2012 study by Sallie Mae
found the number of undergraduate college students carrying credit
cards has dropped from 42 percent in 2010 to 35 percent in 2012. Of
those students with credit cards, a third say they do not carry a
balance.
The benefits of responsible card use
Despite the gloomy predictions of some experts that there is no
good way to use a credit card, there are still countless cards on
the market that offer enticing benefits for responsible spenders.
The
best rewards credit cards
can produce cash back or other perks that may benefit those who are
able to pay off their bill each month and avoid carrying a
balance.
To find the right card, consumers should consider the following
card terms and fees before choosing a card:
- Annual fee
- Interest rate
- Grace period before interest begins accruing
- Rewards or cash back incentives
- Restrictions on reward redemption
To maximize card benefits, policyholders should always be
careful to spend within their budget and make timely payments.
Fortunately, if the recent ABA data is any indication, keeping
current on those payments may not be a problem for most
cardholders.