Bad news on the economic front this month: people are pulling out their credit cards again.
One of the silver linings of tough economic times is that many people finally decide they need to get their financial houses in order. Over the last couple of years, we’ve seen some people getting more responsible about their levels of debt and some banks getting smarter about lending to people who weren’t going to pay them back. As a result, credit card balances declined throughout 2009 and 2010.
But apparently people couldn’t resist the Christmas bug in December; card debt rose that month for the first time since August 2008. If people are “growing more confident” about the economy as this article states, they need to figure out another way to express that confidence than by reckless spending; that’s what got us into this mess in the first place.
Running up card debt is especially foolish at this point because banks are sticking it to their credit card customers more now than in the past for a variety of reasons. For one, they’re finally starting to price risk realistically. For another, they’ve got lots of new costs dumped on them by the regulations in the Dodd-Frank bill, and they are passing as many of those costs on to their customers as they can. Check out this article about a card with a 59.9% interest rate and you’ll see what I mean.
Please don’t give in to the siren song of the debt pushers. Pay cash!