Spending and Saving

Recession Teaches Americans How to Use Credit (Finally)

Americans are pretty dumb about money. If you’re tempted to argue with that statement, just remember that we’re in a financial crisis of our own making.

The good news is, the downturn seems to be making us smarter—at least when it comes to credit cards. People are actually becoming more responsible, taking on less credit card debt and paying off their balances promptly. How do we know? Because it’s hurting the credit card companies! According to the Washington Post, Capital One Financial, the company that issues the Orbitz and MTV Visas, among other cards, is losing money in part because it’s not making as much from fees.

“Many have witnessed the financial turmoil and threats of layoffs and taken a more disciplined view of their finances, making sure to submit payments on time and adhere to limits,” the Post says.

That’s good news after years of overspending and overlending. And it’s not just Capital One. Every month, the Federal Reserve Board looks at how much revolving credit consumers hold—basically, credit card debt. In June, revolving credit was down at an annual rate of more than 8 percent.

I’m not saying we shouldn’t use credit cards. In fact, I’ve tried to use mine as much as possible—reduced income has made those reward points much more valuable to me.

But don’t celebrate our financial savvy just yet—the  says this might just be a blip. Some experts say that delinquencies went up a lot because of the subprime debacle, and though that’s subsiding, there may be another wave if financial problems as people run out of money because of layoffs.

Tags: business, credit cards, debt, Spending and Saving