It is a bit surprising to learn that there has been an 11 percent spike in the demand for consumer credit cards over the last few months. Unemployment continues to plague the nation, mortgage debts and foreclosures are out of hand and personal debt burdens are already at an all time high. So why are people seeking more credit?
Many consumers have regained some much needed confidence in the economy over the last few months. While consumer confidence is great for the economy, it can be detrimental to the actual consumer. Even a legitimate boost in consumer confidence brings additional spending, less saving and diminished focus on debt management.
There has been an evolution in credit cards lately, one that stands to threaten the poor money manager and put their finances at further risk. Prepaid credit cards have become increasingly popular as celebrity endorsements back the “benefits” these cards have to offer. While these cards may help avoid penalty fees and consumer default, they do nothing for one’s credit standing. Part of improving credit is borrowing, and one can’t borrow against money that is put on a card in advance. Further, these cards avoid the biggest problem for most consumers; their inability to manage money effectively. Learning from debt and default fees is part of the money management process, it teaches valuable skills that are necessary for future financial success.
Prepaid cards are generally not the best type of credit card to secure when exiting bankruptcy or looking to improve one’s credit, but there is another culprit lurking around the corner. Pre-approved credit cards may appeal to those with poor credit, but they often hide terrible details in the fine print. As the saying goes “if it seems too good to be true, it probably is.” The same is true for credit card offers. Finding the right card is less about what is easy and more about what is going to improve money management skills and boost credit standings.