Most people thought the Great Recession of the mid-2000s would result in a dramatic decrease in credit card accounts. The United States economy is slowly building back its momentum. The shocker of the sluggish economic bounce-back is that the number of credit card accounts are once again on a dramatic upswing. One would have thought that consumers learned some hard lessons about the dangers of credit cards after the economy’s meltdown. Alternatively, some will argue that a rise in credit cards is a positive sign as it indicates a spike in consumer confidence. The truth might lie somewhere in the middle.
Credit Cards are Returning to Pre-Recession Levels
If one were to ask average people whether the total number of credit card accounts was higher or lower than the number held before the Great Recession, just about everyone would answer “lower”. The truth is that the number of credit card accounts held by citizens of the United States is approaching pre-recession levels. The Federal Reserve Bank of New York states that just under 500 million credit card accounts existed in 2008. This figure dropped to around 380 million accounts in 2010. Today, the total number of credit card accounts in the United States is 435 million. Industry insiders expect the figure to breach the 500 million mark in the near future.
Should the Rise in Credit Card Accounts be Cause for Concern?
The rapid increase in credit card accounts should be construed as a negative if consumers overspend. However, plenty of people take open credit card accounts as a means of building their credit rating. Others use credit cards to pay for products and services when they do not have enough cash on-hand. Yet some view credit cards as predatory lending traps set by aggressive financiers who solicit new members with reckless abandon. More than four billion credit card offers were mailed in 2015. Though this number is less than the six billion offers sent in 2005, it is still a shockingly high number.
Credit Card Rewards
There are some positives to using credit cards. Aside from building one’s credit, some credit cards provide rewards and bonuses that have the potential to pay off big-time. Those who pay their monthly bill in-full and on time enjoy extensive benefits such as a doubling of cash back after a year (“Discover it” card), hundred dollar bonuses (Chase Freedom), two percent cash back (Citi Double Cash card) etc.
Qualifying for these good credit cards can be tough as you need credit to get credit. For many with thin credit files, the best way to obtain these cards with special perks might be to add tradelines to boost your credit score. Piggybacking as an authorized user on an existing credit card that has long, perfect payment history, high credit limits, and little or no balance could the the answer to your credit card woes.
Will the Lessons of the Great Recession be Forgotten?
Though the spike in credit card accounts is not necessarily cause for concern, the hike in credit card balances certainly is. Total credit card balances reached $643 billion earlier this year. According to TransUnion, this figure represents more than a six percent increase across the past six years. However, merely 1.47 percent of credit card holders are delinquent beyond the 90-day mark. The bottom line is that no one is quite sure whether the tough lessons allegedly learned during the Great Recession were in vain.
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