Loan Officer | NMLS #238561
Branch NMLS #920781
Posted On December 13, 2017
With the holiday season in full swing, many American consumers are swiping their credit cards more often to pay for gifts, travel, and other holiday-related expenses. The New York Federal Reserve reports that revolving debt, typically comprised of monthly credit card debt, has hit the highest level in recorded history. In June 2017, Americans had a collective outstanding balance of $1.021 trillion. According to a TD Bank survey, nearly one-third of those credit card holders have never redeemed credit card rewards points and one-fifth have let credit card rewards points expire. As credit card debt and delinquencies continue to rise, selecting the right credit card can have a significant impact on short- and long-term financial goals.
TD Bank’s survey showed 30% of Millennials, 19% of Generation Xers and 8% of Baby Boomers have let credit card rewards expire. Bankrate credit card analyst Robin Saks Frankel explains, “credit card rewards don’t gain value over time. Why have a rewards card if you’re not going to use the rewards?”
A JD Power and Associates survey of over 20,000 credit card holders showed one in five people have a credit card that doesn’t align with their spending patterns. Consumers who do not travel regularly may not benefit from high tier travel credit cards as much as a simple cash rewards card. Bankrate reports that cash back rewards are the most popular credit card incentive with 49% of credit card holders opting for cash back rewards over 17% choosing airline tickets and 12% choosing gift cards.
The New York Federal Reserve report showed 4.6% of credit card debt had become 90 or more days delinquent in quarter three of 2017, up from 4.4% in quarter two, and up from 3.5% in quarter two of 2016. Total credit card balances increased by $24 billion quarter-over-quarter. Increases in consumer credit can be a positive or negative economic signal. Healthy borrowing indicates that consumers are confident they will be able to repay debt. Too much borrowing can be a cause for concern, meaning consumers are unable to afford goods and services with savings and salaries.
With revolving credit currently coming in at an annual growth rate of 4.9%, the type of credit cards consumers choose can greatly impact their financial well-being. Choosing the right credit card, and using available rewards, can be beneficial for both short- and long-term financial goals.