Is it too late to make a New Year’s resolution? Probably not. Is it too early to begin breaking those we have already made? The answer is the same—probably not. In fact, reality teaches us that often resolutions are made and then broken almost simultaneously.
There are no valid statistics related to the kinds of resolutions Americans make each year, but I would be willing to guess that a resolution ranking high on the lists of many folks this year is one concerning getting out of debt. Or at least, trying to avoid getting further in debt.
As the credit card bills from our holiday spending sprees arrive this month, those who have not already made such a resolution will probably want to give this plan due consideration.
Receiving monthly notices from the myriad credit card companies reminds many of us that plastic purchases have become a way of life. Such transactions seem to be as American as Mom and apple pie. Indeed, if you’re under 50, you may not even remember a time when credit cards weren’t available.
The days of the “piggy bank,” when funds were saved up to the level necessary to make purchases, have given way to the “shop ’til you drop” syndrome that seems to be affecting a large percentage of our population. I wonder if Leo Hendrik Baekeland, the New York chemist who is credited with developing the first all-synthetic plastic, had any inkling of where his blending of the resin of two chemicals and heating them under pressure would eventually lead. Probably not.
The answer would undoubtedly be the same for the Diners’ Club, which issued the first credit card in 1950 in the US (for restaurant bills only—at first). By the 1960s, credit cards were becoming prolific—as a timesaving device, rather than as a form of credit. Plastic was on the road to replace paper currency which had first become legal tender in 1862. There is no question that credit cards and subsequent related technologies have helped to make the financial system more efficient, thus promoting economic growth on a global perspective. The difficulty arises, of course, when we have too much of a good thing.
Currently, the number of credit cards in circulation exceeds 785 million, and the use of them accounts for over $1.5 trillion of annual consumer spending. More than three-quarters of all US households have at least one credit card. Reports vary on the amount of credit card debt the average American has racked up; many people and businesses have huge “plastic debts,” but the situation has not reached epidemic proportions—yet.
A Washington, DC research firm recently studied the findings of a federal survey of household debt and found that only about 29% owe $1,000 or more on their credit cards. Another study that reviewed millions of credit reports indicates that about half of all people with credit cards use less than 30% of their limit. The report also notes that some one in eight people use 80% or more of their credit card limits.
It is estimated that around 115 million Americans carry some monthly credit card debt, and some reports suggest that the average person has approximately 17 credit cards. Over half of those with this kind of “plastic debt” have been living with it for two or more years. Making monthly payments to credit card companies has almost become as natural as making regular rent or mortgage payments—and many of these are accomplished with plastic!
Using credit cards has also become a convenient way to shop and pay bills. While they are continually proving helpful in many ways to most of us, overuse can cause difficulties. The “Field of Dreams” adage that “build it and they will come” has been translated into another “Field of Dreams” slogan—“as long as the card clears, use it.” It is all too easy for the spending cycle to spiral out of control. Many companies offer services designed to aid in ridding ourselves of credit card debt. Will all the proffered techniques work? Probably not, but some may prove advantageous for those in dire straits.
If you haven’t made your final New Year’s resolution, you might want to consider one like this: “In 2006, I resolve to use my credit card more responsibly.” Will we be able to make such a promise? Better yet, will we be able to honor that kind of pledge throughout the year? It can be difficult, but making sincere efforts in that direction is definitely a worthy objective for most of us in 2006.