If you’ve been cutting down on credit card purchases lately, you’re not alone. The Federal Reserve’s monthly report on consumer credit was released last Friday, and it shows that the total amount of revolving credit went down for the second month in a row, from $792 billion to about $790 billion. That may seem like a relatively small change, but considering that consumer credit card debt reached highs of over $950 billion just a few years ago it’s significant that the amount is now declining.
Whether that’s good news or bad news probably depends on your point of view. Here at ReadyForZero, we get excited about helping people eradicate their debt, and that means reducing (and in some cases eliminating) credit card spending on an individual level. So we’re proud of our small contribution toward helping that big huge number get a little bit smaller.
Of course, other people have different perspectives on the decline in credit card spending. While it’s a very good and healthy thing for individual consumers, for the economy as a whole it may not be so great. Lower levels of credit card spending (or any type of spending, really) are not particularly helpful since the economy relies on consumer demand and less spending tends to translate into less business for retail and service companies across the nation.
Ben Bernanke, the Federal Reserve Chairman, alluded to this when testifying in Congress last week. He said:
Consumer behavior has both reflected and contributed to the slow pace of recovery. Households have been very cautious in their spending decisions, as declines in house prices and in the values of financial assets have reduced household wealth, and many families continue to struggle with high debt burdens or reduced access to credit.
Regardless of how it will effect the economy, though, you as an individual need to tackle your debt and remain focused on conquering it. In the long run, having citizens who are personally in good fiscal shape and not drowning in debt will be a good thing for the economy and for our country.
So use this news as motivation to redouble your efforts to pay off your credit card balances, and know that you’re not the only one working to bring those balances down to zero!