Credit Basics

By: Dave Burge

A recent study done by a major credit bureau shows U.S. consumers are relying on their credit cards more than ever.

According to Experian's latest National Score Index, compiled from a random sampling of 3 million consumers in the credit bureau's database, 51 percent of the U.S. population has at least two credit cards and 14 percent have 10 or more cards.

Also, 14 percent are using at least half of their available credit, according to the same study. The results "tend to suggest, on average, people in the last couple of years are accumulating more debt and are utilizing credit cards more than in the past," said Pete Bolin, manager of analytics for Experian.

The study also shows that consumers are using their credit cards as an "overall financial vehicle" rather than just an emergency tool, he said. Westsider Steve DuPlessis, co-owner of Office Xperts, said that at one time he had about $43,000 of credit-card debt, including $15,000 for his business.

"Over the course of two or three years, his family been able to whittle that down to less than $10,000, and they've cut up three cards as they've paid them off, he said. We've become responsible credit-card users over time," he said. Now, for his business, DuPlessis uses American Express, which requires him to pay off the balance each month. In his personal life, his family uses credit cards only during the holiday season. "It's pay as you go and for emergencies only," he said. If you get a credit card, wait until you're at least 25 years old, he advises. "You're more responsible as you get older," DuPlessis said.

Maureen Hankins, director of the El Paso YWCA's Consumer Credit Counseling Service, says the Experian study seems pretty accurate. “The people in our credit-counseling program average eight cards," Hankins said. The study also shows that people aren't saving, Hankins said. Saving is "what you have to do so you don't turn to your credit cards," she said. Most people only need "one good, major credit card," Hankins said.

Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc., says the nation's materialistic outlook contributes to increased credit-card debt. "People have a ferocious appetite for items that they really can't afford," he wrote in an e-mail. "Many times they break down and charge it to satisfy their wants." If you find yourself deep in credit-card debt, vow to live on cash and stop incurring new credit-card debt, Dvorkin wrote.

Also, track your spending and make a budget to guide your future expenditures, he added.

Credit cards, however, can be a "very useful tool" if you use them responsibly, particularly if you pay off your balance in full each month, said Greg McBride, a senior financial analyst with Bankrate.com. "Purchases can accumulate rewards, such as cash back or airline miles, while giving you a few weeks of float time to use the card issuer's money," McBride notes.