Credit Card Debt & The Middle Class In 2012 - Quicken Loans Zing BlogMike Dolen is the founder and editor-in-chief of Credit Card Forum, where he shares his tips and advice for managing credit responsibly.

During the past couple of weeks, you’ve probably seen the headlines about how much wealth has decreased in America following the recession. Not that any of us need a news story to know this (it’s obvious) but the reason everyone is talking about it lately is because of the Federal Reserve Survey of Consumer Finances which was released in June.

The two most quoted statistics from this survey are:

  • 7.7% decline in median family income from ’07 to ’10 ($49,600 vs. $45,800)
  • 38.8% decline in median family net worth from ’07 to ’10 ($126,400 vs. $77,300)

Despite how ugly those numbers are, the way that the typical American has been using credit cards lately may surprise you!

1. Declining credit card debt

To pick up the slack for lower incomes and assets, you may guess that the middle-class are relying more heavily on credit cards these days. Well if that was your guess, you’re dead wrong.

A shimmer of good news that came out of the Fed’s survey was that during that same ’07-’10 period, credit card debt has actually gone down for most people! In their own words:

“The decreased prevalence of credit card debt outstanding was widespread and noticeable across most of the demographic groups, though the prevalence of credit card debt rose for families headed by someone aged 75 or older and among families headed by someone with no high school diploma.”

The average American family has less card debt than before:

  • 39.4% of families had credit card debt in 2010, compared to 46.1% in 2007.
  • The median balance during that period decreased from $3,100 to $2,600.

It’s important to realize that without a doubt, the surge in bankruptcies and charge-offs during the recession is helping to paint a prettier picture for those 2010 numbers (since that debt is no longer included). But regardless, the less debt hanging over our heads, the less resistance we should have moving forward when it comes to our personal finances. Ultimately, this should help with the economic recovery.

2. Focusing on rewards rather than debt

Let me be clear that this assumption is not from the Fed report. Rather, it is my own conclusion I’ve drawn, based on my experience of running a popular forum and blog about credit cards.

Prior to the recession, there were a lot of posts and comments on my site about using credit cards for speculative purposes; down-payment on a house, financing a vacation, and other uses which may not be the most fiscally responsible (to say the least).

However after the economy tanked, I saw the discussions shift more towards using credit cards for rewards and benefits. With less money in our pockets, everyone is looking for strategies to save.

Instead of asking questions about buying things they can’t afford, now the most common questions I see posted are along the lines of “What are the best cashback credit cards to save money on groceries and gas?” People are paying their cards in full and using them to reap rewards, rather than interest.

3. Increased awareness of creditworthiness

Back before the recession, even someone with a scandalous or limited credit history could get approved for bulky credit limits. As an unemployed 19 year-old, I remember applying for credit cards and getting 5-figure credit limits right off the bat. Obviously, that would never happen now!

With the bar set higher for approval, it seems there has been a growing awareness of the need to maintain a healthy credit history. Now industry jargon like “credit utilization” have almost become a household term. More people are understanding the importance of monitoring their credit score and getting their annual credit report.

When it comes to credit card debt, more people are wising up to the fact that it can hurt you in more ways than one. I hear from many on my forum who are shunning it not because of the finance charges, but rather because they don’t want the high balances to hurt their credit score!


The way that the average Joe or Jane uses their credit is better than before. From what I see on my forum, the emphasis is now on milking travel and cash back credit cards to save money, while paying the bill in full. Obviously there’s still a lot of room for improvement, but I believe the evidence demonstrates we are heading in the right direction by using cards in a more responsible manner.


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