There
is an increasing trend in the number of consumers saying no to credit
cards. In a country where an average citizen has five credit cards,
this certainly is a new way to step into financial freedom.
Why
are people using credit cards less?
A
growing awareness among the citizens of America about debts and the
problems associated with repayment of debts has made them think of
leading a life without the stress of credit cards.
Revolving
credit is slowing in our economy. In November 2009, the revolving
credit fell by nearly 20%, which is by far the largest. (Source:
Federal Reserve). This drop has been due to tough lending policies by
banks on one hand and consumer's lesser spending, on the other.
However,
a complete stop to the usage of credit cards also is not a great game
plan as it means not building a credit history. A credit history
would be considered should you apply for a loan later on. Even small
deals like renting a car or booking a room in a hotel become
difficult. Some hotels have a policy not to rent out a room to
customers who pay by cash or debit card. A responsible use of credit
card can build a good credit record.
A
simple lifestyle has become a way of life for many who want to opt
out of credit cards. Instead of giving in to the temptation of paying
with credit cards to purchase stuff not in budget, people are
preferring to lead a simpler life than get into the payment routine.
People
who have freed themselves from credit card debts no longer want to
acquire new cards or for that matter spend with the old cards even.
They want to buy with cash or pay with debit cards. People often are
getting into aggressive pay back mode and are clearing their credit
card debts realizing that the minimum payments they make will last a
lifetime to clear their actual debts.
Debit
cards are becoming a payment norm now. By using debit cards, expenses
have been controlled by many consumers. In 2009, as much as 28% of
credit card consumption has come down, according to a survey
conducted by Auriemma
Consulting Group. (Source: www.usatoday.com/money)
Notwithstanding
the freedom the debit cards offer, there are certain aspects that
cannot be ignored using them. The downside of debit cards is the
limited protection debit cards possess. You cannot control the
expenditure if you lose a debit card. Once your debit card is stolen
and is used by the thief to buy something, the money is immediately
debited from your account. It would be a while before you fight for
this and get money credited back to your account. Meanwhile, checks
may bounce and will increase your problems further.
A
balance between using credit cards, debit cards and cash is what is
expected of you. If you are a wise consumer coupled with calculation
and alertness, there is no reason why you should get into credit card
debts at all.