An in-depth analysis of America's borrowing appetite

A Credit card is something an American cannot do without and banks are sweetening borrowing and financing terms more than ever. The main reasons for this ‘cheap credit’ are that interest rates are low.
Companies lure US residents with enticing advertisements that make them spend more, regardless of the source. Some people consider it a financial disease and reforms should be put into practice.

According to a study conducted by the economist, borrowing trends are surprisingly steady in the course of the economic cycles of the USA in the last two decades. The majority of the borrowers forward their debt to the following debt cycle – which is typically 30 days; which leads them to procrastinate on their debt obligations.

Borrowing money is a constant phenomena in America

Half the youthful borrowers, who borrow money using credit cards, are not disciplined in paying off their debt. Therefore, the money owed just accumulates and they result to even borrowing more money.
This perennial borrowing usually affects their credit scores and those with bad credit scores are shunned by major banks. Americans fail to come to a point where they reduce their debt in all the youthful and working years. They consider tapering their debt when they reach their retirement age.

They can hardly wait to start earning money and borrow more

Children in the US are taught the benefits of having a credit card such as convenience when shopping and paying for utility bills in the comfort of their houses. When they learn the benefits of credit cards they look forward to joining employment and earning some money in order to be eligible to borrow some more.
Little do they know that these ‘new money’ comes with some strings attached by the major banks.
Credit cards are converted into a replacement of reserves for these rookies in the job market.

Continued use of credit cards

Middle-aged Americans still use credit cards to carry out transactions, it is as if it is embedded in their DNA, these older folks use only half of their borrowing potential. On the other hand, rookies try to clear the available money in a short period. It can be observed that as the young ones – fired up – stabilize their lives with marriages, mortgages and other responsibilities, their borrowing appetite subsidizes.

It is at this age that they start thinking of stuff like insurance and other investment opportunities. Others could in general require large amounts of money while another person might consume and invest a few hundred dollars. However, not every citizen’s use of credit cards shows a discrepancy for the duration of his or her existence.

The Bottom line

Banks and the public go with flow when times are good, but when financial disasters arrive such as the Great Depression of 1929 and the recent financial crisis, everybody tightens his or her wallet. In these situations, it is only the government, which is capable of spending some money. Financial institutions are always fine-tuning their lending rates on top of the interest rate set by the Federal Reserve.