Credit Card Spending Down; Trend will Reverse
An eye-opening article posted recently by CreditCards.com -
Credit card balances suffered their biggest percentage drop in more than 30 years in February, according to the latest Federal Reserve data, as consumers responded to the recession by reducing their reliance on plastic.
People are spending less, saving more and the credit card companies are cutting limits. It’s a triple whammy
Basically what is happening in the credit markets is that credit card companies are being forced to increase their limits on who they are willing to lend credit to making credit cards harder to get, especially for students. Â Later in the article it explains how this trend will reverse -
Right now, the dominant trend is people paying down balances in anticipation of a rough year ahead. Later that trend will reverse as people are forced to pay back basic expenses on credit cards
What does this mean for students?  As we have said before, student credit cards are in trouble.  This is dangerous for students because it reduces their ability to build a positive credit score.  When students graduate from college with no credit history, it will be even harder for them to get a decent credit card, take out loans, etc.  When the “savings” trend reverses, and people are forced to use credit cards again, you are going to need a decent credit score in order to obtain a credit card with a good APR, rewards plan, etc.  Luckily there are still student credit card options for students with limited credit such as the Orchard Bank MasterCard, and prepaid credit cards which come with the guarantee that they will not put you in debt.
Keep your eye on the news.  What is happening today in the credit markets is likely to affect you in the future.
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