The word credit emits conflicting emotions in us. We know that we have to hate it but we also know that we cannot live without it – at least not until credit scores become irrelevant. The fact is, the problems we have with debt are usually a result of financial mistakes that we made in the past. It is not really the debt itself that is the problem. It is our own reaction to it.
That being said, you have to keep an open mind when you think about borrowing money. It is just like our perception that evil things come from money. That is not true. It is our own reactions to it and how we choose to use it and let it run our lives that make it wrong. But not the concept of money itself. You need to think of credit in the same manner. It is not bad because you sometimes need it to improve your financial situation. You just have to make sure that your perspective is straight and you are using it the right way.
What study shows about consumers and their debts
Fico.com conducted a research that focused on bankers and what they think about the future of credit with consumers. The results of this study is published in the article entitled “Are Consumers Ready to Spend More? And Borrow More?” It discusses the thoughts of bankers about their expectations when it comes to consumers and their behavior about borrowing money.
Here are the important findings on this report, which conducted its survey on both US and Canadian bank professionals.
46% of respondents believe that consumers requesting for new credit will increase while 16% expects it to decrease.
46% believe that credit line increase requests will go up while 8% believes it will go down.
53% believe that the average balance on credit cards will increase while 7% believes it will decrease.
Half of respondents believe that people 30-39 years old will have the most contribution to the expected increase in credit.
70% of banker respondents believe that people 39 years old and under will drive the growth in lending.
80% of bankers believe that the demand for mortgage, car loans, student loans and credit cards will be met by the supply without a problem.
49% believes that student loan delinquencies will increase.
So what does all of these mean for consumers? This expectation means that consumer confidence is up. In fact, this could be just a continuation of a trend – since the Commerce Department also released a study that consumer spending rose .2% in July and .3% in August.
How to be smart when borrowing money
Although credit confidence is up – at least, that is what the bankers expect, you must exert caution when you are borrowing money. It is possibly safe to assume that this expectation may also be driven by the season. The holidays are coming and we are all gearing to spend money for the festivities that this season will bring. We have Thanksgiving, Halloween, Christmas – all of these will require you to spend money. In some cases, people opt to use credit to make ends meet.
While we advise that you try to use cash instead, you may use credit cards during the holidays – but with extreme caution. Here are some tips that we have for you to keep your credit spending low and still enjoy the holidays.
Consult your budget. Before you make any financial plan, you must always consult your budget first. See which of your expenses you can pay for in cash. If you have to shift some of your expenses and cut back, choose which of them you can let go so you can make room for the holiday expenses. The idea is to spend in cash as much as possible.
Choose the expenses you will pay for in credit. Most of the time, our cash is not enough to cover the holiday costs that we have to meet. That means we need to fall back on our credit cards. Choose carefully the expenses that you can purchase with cards. Select the ones you will get the most rewards from.
Create a payment plan. If you have to use your credit card, make sure that you will adjust your budget and incorporate a payment plan for what you will borrow. Spend the next few months after the holidays living a frugal life. That should help you pay down your debts a lot faster.
Opt to make your gifts instead of buying them. To cut back on your holiday budget, you may want to just make your gifts instead of buying them. The effort will surely be appreciated and it will keep you from incurring holiday debt.
Although the consumer credit spending is expected to rise, that does not mean the economy is stable enough for you to be reckless about it. In fact, even if the economy is at its best form, you must always exert caution when you are borrowing money. Things like knowing the reason for the debt and making sure that you can pay for it immediately are among the things that you should keep in mind. That is how you can keep credit in your life without being scared that it will ruin your future.
