What would happen without credit card debt?

 

Credit cards aren’t just convenient—they actually create spending power that is then used to buy goods and services.

The spending power of a credit card.

Let’s face it; we live in a credit world. Credit cards aren’t just convenient—they actually create spending power that is then used to buy goods and services. In fact, about two-thirds of the U.S. economy is based on consumer spending and all totaled Americans have some $2.2 trillion (and counting) of outstanding consumer debt.

However, if you speak with most families in the U.S. today; among the top five priorities for most is to become debt free.

So, what would happen if, by chance, everyone squeezed their household budgets to pay off their debts?

According to economists, such a scenario would be an economic disaster. First, you would likely see a sharp decline in GDP and a huge spike in unemployment. Without all that spending, there would no need for millions of jobs – from the people who make, package, and deliver the all the stuff we buy to the people who work in the stores, restaurants, and malls that make a living serving customers.

As much as people complain about the banking system, if consumers paid off all of their outstanding debt, it would send shockwaves through the financial services industry, especially if we all vowed to remain debt free. Watching those lenders come crawling back for more business might provide some short-term satisfaction to all of us borrowers – especially those of us suffering from ridiculously high credit cards rates, along with rapidly proliferating and completely unjustifiable “fees.” But an economy without a deep, reliable pool of credit wouldn’t get very far. As much as we all hate paying interest, we all need lenders even more.

As opposed to disrupting the entire financial system, consumers need to learn to borrow more responsibly. But, in addition, the credit industry needs to lend responsibly as well. Each week, mailboxes are flooded with letters from companies that offer “teaser rates” and fine print that trick people to sign up for their credit card, only to change the terms once credit loans have been made.

Recently, U.S. News and World Report completed an analysis of credit card companies to come up with a list of the “Top Credit Cards by Category” that offer consumers the best terms.

To understand the best card for your situation, the publication established a set of seven questions (with detailed explanations and reasons), you should ask yourself before shopping for a new credit card.

  1. What is my Credit Score?
  2. Do I have an existing credit card balance?
  3. Are rewards right for me?
  4. Am I willing to pay an annual fee?
  5. Will I use the Cardholder Benefits?
  6. Do I need a credit card for my business?
  7. How many credit cards should I own?

Based on your answers to those questions, U.S. News and World Report listed the following credit cards that fit consumer profiles in various categories.

Bad Credit 

Discover it Secured Credit Card: Best secured card for people with bad credit

Credit One Bank Cash Back Rewards Visa Card: Best unsecured card for people with bad credit

Cash Back

Citi Double Cash Card: Best for flat-rate cash back and no annual fee

Chase Freedom Credit Card: Best for rotating bonus categories with sign-up bonus and no annual fee

Blue Cash Preferred Card from American Express: Best for grocery and gas spending with sign-up bonus

Travel

Chase Sapphire Preferred Credit Card: Best for $4,000+ general travel spending with sign-up bonus

Bank of America Travel Rewards Credit Card: Best for $1,000+ general travel spending with sign-up bonus and no annual fee

Barclaycard Arrival Plus World Elite MasterCard: Best for flat-rate travel rewards and sign-up bonus

Airline

Southwest Airlines Rapid Rewards Premier Credit Card: Best for loyalty airline spending with sign-up bonus

Hotel

Chase Marriott Rewards Premier Credit Card: Best for loyalty hotel spending with large sign-up bonus

Starwood Preferred Guest Credit Card from American Express: Best for loyalty hotel spending with sign-up bonus

Business

Chase Ink Business Cash Credit Card: Best for general business spending cash back with sign-up bonus

Capital One Spark Cash Select for Business: Best for flat-rate cash back with sign-up bonus

Chase Ink Business Preferred Credit Card: Best for business travel spending and sign-up bonus

The Enhanced Business Platinum Card from American Express; Best for $20,000+ business spending and sign-up bonus

Student

Discover it Card for College Students: Best for student

Balance Transfer and Low Interest

Chase Slate Credit Card: Best for 15-month zero percent APR promotional period and no balance transfer fee

Citi Simplicity Card: Best for 21-month zero percent APR promotional period

Simmons Bank Visa Platinum Card: Best for very low ongoing APR

Please note that Business Finance Corporation does not endorse any of the above credit card recommendations. This information is provided as a reference point so that our clients can further research and make their own informed decisions.

Analyzing options for your financial future is not always easy, sometimes it is beneficial to have a third-party expert assist with the difficult decisions. At Business Finance Corporation, we have experts that are ready to help.  www.BFC.Vegas.

Your Partner in Success,

David Cabral