by Elizabeth Aldrich | Updated Aug. 12, 2021 - First published on Nov. 18, 2019
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
But is our progress enough to finally get us out of debt?
But is our progress enough to finally get us out of debt?
Credit card debt in the U.S. hit an all-time high last year, surpassing even pre-financial-crisis levels, according to The Ascent's credit card debt statistics. With the average cardholder carrying a balance of $6,028 as of early 2019, it's clear that there's room for improvement when it comes to our credit card use.
Luckily, new findings from the 2019 Consumer Financial Protection Bureau (CFPB) Credit Card Market report suggest that we're learning.
Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
Private label credit cards, more commonly referred to as store credit cards or retail credit cards, are on the decline.
Before the recession, in 2005, 51% of adults held a private label credit card. As of 2018, that number has dropped to 40%. This can't be chalked up to an overall decline in credit card usage, either, because it's just as common for adults to hold a general-purpose credit card now as it was in 2005.
Private label credit cards are rarely a good deal, especially when compared to general-purpose credit cards. Store credit cards are notorious for their sky-high interest rates and predatory terms. On top of that, private label cards can only be used with one merchant or a select group of merchants, so any rewards offered are severely limiting when compared to general-purpose credit cards.
Americans are starting to get the hang of how to maximize credit card rewards. Most notably, they're putting more of their spending on rewards credit cards rather than credit cards that offer nothing in return. The CFPB report shows that the share of overall credit card purchase volume on rewards credit cards has been climbing steadily since 2015, with 60% of new accounts in 2018 being those that offer rewards.
If you're going to use a credit card, there's little reason to use a credit card that doesn't offer rewards over one that does. However, credit card rewards can incentivize consumers to spend more than they normally would. It's important to keep your spending under control and remember that regardless of how many credit card points you're earning, overspending is never worth it. Interest fees tend to be higher on rewards credit cards, too, so they're best for people who pay off their balance in full each month.
Some of the best balance transfer offers come with a 0% intro APR for a limited time, allowing cardholders to pay off their debt quickly without incurring any interest fees. When a balance transfer is done right, it can be a smart way to pay off debt at a lower interest rate, saving yourself both money and time. Americans are clearly catching onto this technique for paying off debt quickly. According to the CFPB report, balance transfer volume has increased by 38% in just three years, while overall balances have risen by just 21%.
Although this means that indebted consumers are taking advantage of more efficient debt payoff strategies, it doesn't necessarily mean they're doing it effectively. Making a balance transfer to a credit card with a low introductory rate can be risky. If you don't pay off the balance in full before the introductory period ends, you're on the hook for the remainder at a much higher interest rate.
Although purchase volume has increased by 34% since 2015, cash advance volume has only gone up by 2%. In 2018, only 2% of overall balances were made up of cash advances.
This abrupt slowdown shows that Americans are learning that cash advances are one of the most costly credit card mistakes. Most credit card issuers charge a cash advance fee for taking cash out of an ATM with your credit card — often as high as 5% of the amount withdrawn. On top of that, the interest rate charged on a cash advance is often significantly higher than the card's ongoing interest rate.
Credit scores have been steadily increasing for years now, and that trend continued throughout 2018, even as the number of Americans with a credit score also increased. There are now 8.5 million fewer consumers with below-prime credit scores than there were in 2012 when that number peaked. The most dramatic change has been happening at the high end, where more consumers are achieving super-prime (near-perfect) credit scores.
Although all of this is good news, credit card users still struggle to control their spending. More cardholders are maxing out their credit cards, with the CFPB report showing that credit card utilization rates -- or the share of a person's credit limit that's being used -- have increased dramatically over the past decade. Credit card delinquency, or the share of balances that are overdue by 60 days or more, has also been rising for several years.
Increasing credit scores, rewards, and balance transfers are signs that we're becoming more credit card savvy, but that doesn't always translate to wise financial decisions. The next step is to learn how to pay off our credit card balances in full every month.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.