Why do so many Americans have credit cards?

The latest iProduct. That perfect pair of pumps. The big screen T.V. that you simply must have.

We’ve all been there.

If you own a credit card it’s oh-so-simple to swipe your way to satisfying your needs. After all, that’s what it’s for, right?

Credit Card

The fact is that nearly 68 percent of households use credit cards – that’s according to a study conducted by the Federal Reserve in 2010. The U.S. Census Bureau revealed in 2011 that the average American carries $7000 in “unsecured” or credit card debt. One would think after the Great Recession that the 68 percent would have declined some, but statistics show the number has remained steady since 2000. Why?

We were curious so we posed the question to our readers. One of the first responses seemed to echo dozens of other replies.

“It’s easier than carrying cash and it’s there in the event of an emergency,” said Barbara White Daille, an author who makes her home in the southwest.

Daille isn’t alone in her reasoning. Many readers sited that their cards were there for “an emergency.” Another popular reason was tracking business and personal expenses.

Airline miles and “points” were also mentioned, as well as discounts and special offers on merchandise.

Here’s our top ten list of why American’s own credit cards:

  1. In case of an emergency.
  2. For the rewards, miles, cash back, etc.
  3. Easier and safer than carrying cash.
  4. Improving a credit score.
  5. Tracking financial information and/or business expenses.
  6. Simplifying bill payments.
  7. For convenience.
  8. Online purchases.
  9. Purchases are guaranteed.
  10. Being able to rent a car and/or for travel.

But there are many more reasons why carrying numerous credit cards is the norm. In fact, it’s become a goal for credit card churners.

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Credit Card Churning More Popular

Credit Cards

Consumers appear to like being rewarded. Perhaps that’s why the trend of “churning” or “flipping” credit cards has become so popular in recent years. Credit card churning is the practice of opening and closing more than one card, usually over a twelve month period, in order to reap the rewards, but not everyone thinks that’s such a smart idea.

Risk of Identity Theft

“I don’t think opening and closing credit cards looks good on a credit report,” said Maureen Bonessa, a reader from California. “Plus, the more institutions that have your personal information, the more chances you have of being hacked. No thanks.”

Bonessa brings up a good point. The use of credit cards might improve your credit score, but it also increases your risk for identity theft. Anytime you put your personal information out on the ‘net you risk someone stealing it and turning your good credit into bad. Be cautious, and remember you’re allowed one free credit report a year, so if you do use credit cards, remember to keep an eye on them.

Still, for many people the rewards outweighed their concerns. It seems credit companies have been smart to use incentives to entice consumers into signing up for their cards.

“We recently flew to Mexico first class for $150 per person, round trip, with our points,” said business owner Richard Ashe. “Several years ago we flew to Italy for the same. The key is to pay your card off every month, otherwise it’s not worth it. If you pay interest it costs more than the bonuses.”

Ashe has a good point. Consider this: If the average American owes $7000, and if those consumers made the minimum monthly payment of $72 (at a 12% APR) a month, it would take them 429 months to pay the debt back. The total interest paid would be $23,416. That’s a grand total of $30,416 for that $7000 debt. That’s a hefty price to pay.

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Use Credit Cards Responsibly

So while owning a credit card for the sake of convenience isn’t a bad thing, as with any debt, one must be careful. Act responsibly. Don’t ever extend yourself, and if you can pay cash, do.  That’s the simplest and easiest way to keep yourself out of debt.

Pamela Britton-Baer is a staff writer for SuperMoney. Her mission is to help fight your evil debt blob and get your personal finances in tip top shape.
Photo: Wikipedia, Funny As Duck