IN THE MONEY: Credit card use takes a dive

Consumers are slowly digging themselves out of debt, the Federal Reserve reported last week.

It means consumers, whose spending in recent years has accounted for as much as 70 percent of the GDP, are returning to a pay-as-you-go mentality.

It’s impact on the economy is harmful. No longer are consumers plunking down a credit card to hop a flight to Miami on the spur of the moment, costing airlines, rental car companies, hotels and restaurants thousands.

But it had to be done. Credit card debt has grown from 15 percent of total debt in 1980 to 38 percent of total debt at its peak in September 20008, according to the Fed. It grew beyond what workers could afford, particularly during the past decade when workers wages held the line.

That’s probably not a coincidence. Workers needed to borrow the money to keep up with the neighbors, who, it turns out, also were borrowing the money.

Whether this marks a shift in consumer psychology isn’t clear.

I have a feeling this has more to do with the banks cracking down and calling in their loans than it does with consumers who suddenly found restraint.

But it’s a sign consumers are living within their budget, whether they want to or not.

By Michael Diamond for APP

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