- Consumers are using credits cards more and more for basic everyday needs
- At the same time, new technology makes it easier than ever to tap into lines of credit
- Growing debt, a poor economy, and a sagging job market may mean an increase in bankruptcy filings
- Consumers should know their limits and what to do if their debt gets out of control
Millions of Americans have one or more credit cards, and they use them often. It's not necessarily a good thing, though. And it may get worse.
A report from August 2010 tells an alarming tale in Atlanta, Georgia. Consumers there have the highest average credit card balances compared to other major US cities even though Atlanta residents are carrying fewer cards than in past years.
Experts blame frivolous spending, which has been a problem with credit card use for years. However, they also point to the poor economy as a major factor. More consumers are using their credit cards for basic, everyday living expenses like groceries, rent, and utility bills. Lost jobs, lower wages, and a host of other economic ills are forcing consumers to use credit to fill the gaps.
And you can bet the problem isn't isolated to Georgia, either. The poor economy is affecting everyone from coast to coast.
It may get worse, too. New technology from companies like Bling Nation makes it easier than ever to use your credit in all types of stores, from bookstores to coffee houses. You don't even need to carry your card, much less swipe it. All you need is a cell phone.
It works like this. You place a "Bling Tag" on the back of your phone (Tags are free). When you visit a retailer who accepts Bling for payment, you tap your phone on a "Bling Box," which is a lot like a credit card swipe machine. The Tag is connected to your credit card, or even your PayPal account, and your purchase is automatically charged to the account.
Consumers like it because it's fast and convenient, although it's only available in limited areas. And Bling claims that its encryption, PIN requirements, and other security measures makes it safer than using cash, checks, or credit cards. Retailers like it because they pay Bling much less than what they pay credit card companies in swipe fees.
What You Can Do
Late in 2010, there's little indication there'll be a full economic recovery of the US economy anytime soon. Personal bankruptcy filings are higher in the first half of 2010 than in the same period in 2009, and that trend is likely to continue. Credit card debt is a leading cause of many bankruptcies.
There are some things you can do to avoid these problems, such as:
- First, live within your means. Luxury items can wait until you're back on your financial feet again
- Try to pay cash or by debit card and avoid credit card use altogether. If you're using a service like Bling, see if you can connect the Bling Tag to your savings or checking account
- Pay your monthly credit card bills in full - try not to carry a balance
- If you're having trouble with everyday expenses for you and your family, look for help in the community. Food banks can help with meals; thrift stores and charities can help with clothes; and your utility companies may offer lower rates or a payment plan to keep water, heat, and other essentials in your home
- If you're overwhelmed with debt, talk to your creditors to see if they can arrange repayment plans that fit your budget, or talk to a reputable credit counselor
- If all else fails, talk to an attorney about filing for bankruptcy protection
In tough economic times, it may be easy to make ends meet by tapping into your credit line. That's not necessarily bad. If you're careful. If you use it as a crutch and too often, though, you may find yourself in a huge financial hole that may take years to climb out of. Use your credit wisely.
Questions for Your Attorney
- Can a utility company refuse to take a credit card payment?
- What are the advantages and disadvantages of credit counseling and bankruptcy?
- How long will a bankruptcy stay on my credit report?