The new “buzz” out there from all the experts is that people are finally waking up-based in no small part to the financial crisis most of the country faces-and realizing that they should spend only what they have and to stop using credit cards. Some experts say that people will stop using credit cards and cushion their savings instead. The theory being that people in the United States, who have had a negative savings rate for some time (meaning literally saving nothing and spending more than what you earn), have finally awoken and realized that they should save their money. While a beautiful thought it is not at all pragmatic. There are, to be honest, numerous individuals out there that have used credit cards to pay for flat screen tv’s, stereo’s, electronics, etc. They know who they are and they are feeling the crunch of collection agency phone calls, judgments against them, ruined credit, etc. There are others however, that NEED to use credit cards to supplement the amount that they earn. A readily available line of credit which can be used to pay for such necessities as food, clothing (not designer), utilities, phones, etc. While it may very well that America is finally over its credit binge, it may be more accurate to state that Americans finally know that they are spending money that they may not have. They are aware that using a credit card to purchase a Bose radio may not be the best move to make, given the fact that they likely will not pay that radio in full for years if they simply make minimum payments. But there is a large segment of the population for which credit cards are a vital survival tool. I am in now way condoning the actions of those who would abuse the privilege of revolving credit. I am simply saying that to suggest that Americans will instantly cut up their cards and turn their financial lives around discounts the ever present reality that many Americans simply need these cards to survive.
