Credit Card Use Trends are Reversing

At the end of 2008, in the middle of the Great Recession, more consumers were using debit cards than credit cards, according to First Data. However, according to Silvio Tavares, Senior Vice President of First Data, “Credit is back in favor.”

He went on to explain that consumers spent the past couple of years reducing their credit card use, but since April 2011, credit card use has increased significantly.

In fact, purchases made with credit cards rose 8.2 percent just in the first quarter of 2011. By the third quarter, purchases increased by 10.6 percent, a huge jump compared with 5.9 percent in the same quarter last year.
Avoid Falling Back into a Bad Debt Trap

Many experts say that consumers have returned to credit cards because banks and credit card companies have ramped up solicitations and boosted incentives, especially for individuals with lower credit scores. While the temptation to jump back on the credit bandwagon is probably enormous, it’s important to avoid the debt trap by using your credit card wisely:

* Pay your bill early or on time: The reason that many credit card users fall into debt is that they fail to pay their bills on time, succumbing to penalty fees they can’t keep up with.
* Pay your bill in full: Paying your bill in full is another way to avoid paying extra money. Issuers charge their customers interest for carrying over a balance to the next month. So pay your bill in full to keep your costs low. It's not different that you get the cheapest credit card rates. You do not need to pay extra bills.
* Only buy what you can afford: If you know that you can’t afford the 52″ television in the next month, don’t buy it. Only purchase what you can afford to pay off in a reasonable timeframe or you’re setting yourself up for a debt trap.

In the world of credit, there are definite benefits to having a credit card, including increasing your credit score over time if your balance is managed appropriately. However, if you are not sure you can manage your card without falling back into debt, consider other purchasing options like cash and debit cards to make your purchases.