Cash Vs. Credit Card Debt: The U.S. Average

During the recession, Americans started cutting their credit card debt and started keeping more cash handy, according to the Federal Reserve.
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Americans are increasing their use of cash, and keeping credit cards tucked in their wallets more often, according to the Federal Reserve Bank of Boston. In 2008, the average consumer kept $230 in cash on hand, but a year later the average grew to $291. At the same time, the number of monthly payments made with cash increased from 14.5 in 2008 to 18.4 in 2009.

More Cash on Hand (at Home)

Of the cash Americans keep on hand, an average of $89 was in their wallets or purses, up from $79 a year earlier. Cash kept at home grew from an average of $157 in 2008 to $229 in 2009.

“For many years, consumers had been migrating away from paper instruments toward cards and electronics,” said Scott Schuh, director of the Federal Reserve’s Consumer Payments Research Center. “In 2009, consumers reversed that trend and moved back to more reliance on cash.”

Credit-Card Debt Dips

In May, TransUnion reported the average credit card debt per borrower dropped 1.7% to $4,878 in the first quarter of this year from $4,962 during the same period in 2012.

For all of 2012, the average credit card debt per borrower was $5,122, down 1.58% from 2011, according to TransUnion data. "Both credit card delinquencies and balances are below historic norms," said Ezra Becker, vice president of research for TransUnion's financial-services business unit.

Spending More with Credit Cards

There are advantages to using credit cards. For example, Visa touts the ability to dispute charges when a product or service is not delivered, insurance for auto rentals, and the ability to get emergency cash.

There are disadvantages, however, besides high interest rates. In an article on, Art Markman, a scientist at the University of Texas, highlighted research showing consumers spend more when using credit cards than when they use cash.

People may pay less attention to prices when they are paying by credit card than when they pay by cash. Research suggests that it's harder to remember the amount actually spent when using a card rather than cash.

If you have cash, then you can also limit the amount of cash you carry as a way of limiting the amount you spend without having to remember all of the purchases you have made, Markman said.

Credit Card Tips

If you’re going to use a credit card, the Federal Reserve has a few tips.

First, pay on time. Paying your credit card account on time helps you avoid late fees.

Second, stay below your credit limit. If you go over your credit limit on your card, your card issuer could charge a fee and increase your interest rate.

Third, avoid unnecessary fees, such as fees for cash advances, transferring balances, and having a payment returned.

Fourth, pay more than the minimum payment. If you can't pay your balance in full each month, try to pay as much of the total as you can. Over time, you'll pay less in interest charges.

Lastly, pay attention when credit card companies change the terms of your account. By reading these "change in terms" notices, you can decide whether you want to change the way you use the card (or stop using it altogether).

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