Americans’ Savings vs. Their Credit Card Debt

The results of a recent survey conducted by BankRate.com really got me thinking.  Folks continue to rely on credit cards instead of cash in hand, and it’s a trend that worries and saddens me.

According to the survey, only 31% of parents and 22% of non-parents claim to have more credit card debt than personal savings.  While some might look at these results with optimism, I tend to think there are factors influencing those numbers that aren’t necessarily good things.  For instance, I suspect that the filing of Chapter 7 bankruptcy here in the U.S. plays a role in one’s ability to acquire new credit card debt.  And since we’re always hearing that filings are up because of the economy, I suspect that plays a role here.

Income level also plays a role here.  According to the survey, 70% of folks making over $75,000 per year have more savings than credit card debt.  When your income is higher, it’s easier to buy what you want when you want it without carrying credit card debt.

What I thought was more telling about this survey is that it focused on credit card debt specifically and not debt as a whole.  All of us, myself included, are guilty of carrying more debt than we should.  We buy houses that are too expensive, we buy cars that are excessive when compared to our needs, and everyone knows that grown-ups’ toys (boats, RVs, ATVs, motorcycles, etc) don’t come cheap.

I also know folks who keep using credit cards because they don’t want to risk losing them “in case of an emergency”.  I whole-heartedly agree with Jack Spirko over at The Survival Podcast though when he says that if you use credit cards, even if you pay them off in full every month, you’ll end up spending more money.  There’s something to be said for handing over physical cash that you took from your wallet.  When you can experience the physical transaction, when you can see that when that cash is gone, it’s gone, you tend to be more thoughtful about your purchases.  I know we have been when I’ve convinced my husband to buy groceries with cash.  When you swipe a card, even when it’s your debit card, there’s a different experience going on there.

Saving is hard, but getting out of debt is even harder.  I know so many folks like me.  We don’t have a lot of credit card debt, but paying down that debt means that it’s harder to save, and it’s hard not to fall back into those old habits.  “We need [insert unexpected need here] today and we don’t have savings yet, but we have available credit on this card that we’ve been paying down, so…” I will say, before I wrap up here, to the people who’ve thought like this, save just a little bit out of every paycheck.  Even if it’s $5 or $10, put it back.  Even in the tightest times, we can afford to put $5 away.  It might not seem like it matters, but it really does, especially if you switch to a cash economy.

I suspect that Americans’ problems with debt run a lot deeper than the BankRate.com survey would have us believe.  All I can do though is remind anyone who’ll listen that less debt equals more liberty and freedom.  Although the path will be hard at first, the destination is well worth the journey!