What's Your Credit Card Spending Style?

By Beverly Harzog. Last updated 8 July 2014. 13 comments

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A lot of experts predicted that consumers would cut back on credit card spending this year. I'd even bet that consumer behavior analysts felt they were making pretty safe predictions. And honestly, I kind of agreed with them.

I can think of three reasons we should all be skittish about flashing our plastic. For starters, we had the increase in payroll taxes at the beginning of this year. That alone can give people the spending yips for a while. Second, there was all that business about delayed tax refunds. Third, there's the still-sluggish economy. It's improving, but pretty darn slowly.

But guess what? Consumers are not behaving according to plan. They're using their credit cards at a steady rate. A recent report by First Data showed that credit card sales even increased 8.1% in February. This is especially unusual because people tend to cut back on spending for a few months after the holidays.

Now, I suspect that some of this credit card usage is by those who actually were affected by the tax increase or the delayed tax refunds. They need their credit cards to cover the gap between take-home pay and household expenses.

But on a positive note, a recent report from the American Banker's Association showed that consumers who are carrying a balance are more likely to pay on time now. Delinquencies have gone way down, which is awesome, because a late payment can really drag down your FICO score. (See also: 10 Surprising Ways to Negatively Affect Your Credit Score)

Now, stats can turn around quickly, so I'm not saying this is how consumers will behave going forward. But I do spend a lot of time talking with folks about their credit cards. I get a sense that our spending behavior, while not quite as predictable as we may have thought, kind of falls into one of the following four categories.

Savvy Spenders

You keep your credit card balances low, and you always know what your utilization ratio is. (Just a reminder for folks who don't remember what this is — the credit utilization ratio is the amount of credit you've used compared to the amount of credit you have available.) You have excellent credit, and you take pride in that.

You always pay your balance in full — and on time — every month. You feel confident about your financial future even if the economy doesn't look great. You have an emergency fund set aside for unexpected expenses, so that makes you feel like you can weather any financial setbacks.

Cautious Spenders

You might be extra cautious because you got burned during the recession. As a result, you've vowed to never get caught in a credit card mess again. So over the past few years, you've made an effort to learn everything you can about personal finance and managing credit.

These days, you feel pretty confident about your finances. You use your credit cards regularly, but you're careful to stay under budget. Your motto is "Don't spend more than you absolutely have to."

Smart Revolvers

I always advise people to pay their balances off every month. But I do know there are some folks who use their cards to make ends meet. If you're a smart revolver, you've figured out how to carry a balance and minimize your interest expense.

You're also keenly aware that your FICO score is affected by your utilization ratio. You try to pay more than the minimum payment, and you always pay the bill on time. You're doing the best you can to maintain a good (or even excellent) credit score.

Rookie Revolvers

If this is you, you have no idea what a utilization ratio is. In fact, since you didn't even read the disclosure statements, you don't know off the top of your head what your interest rate is. This group is likely to get into serious debt before they know what hit them.

Just for the record, there's no shame in this category. Unless you had a parent who taught you about credit before you graduated from high school — or at the very least, college — you had to learn the hard way. No one is born with a working knowledge of compound interest.

So what's your credit card spending style? Listen, there are no wrong answers here. I'll 'fess up and admit that I was once a Rookie Revolver. Hey, I'll bet most of were at some point in time.

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Guest's picture

I consider myself to be a cautious spender but also take advantage of credit card opportunities. I recently signed up for the Macy's credit card to take 20% off my bill the first time I bought a product. This was a suit and I ended up buying a $400 for $99. Second, I signed up for the Southwest credit card which guaranteed me 3 free flights!

Beverly Harzog's picture

Hi David -- You might be cautious, but you sound pretty darn savvy, too! I love it when I get free flights for signing up for a card that I actually need anyway. And you got three? Way to go!

Guest's picture

I guess I'm a cautious, possibly savvy, spender. I messed up during the recession but I was in college and didn't really have an income. I had some lates.

Now, I keep to a budget. I put about 90% of my daily spending on my credit cards (I have 3 but only regularly use 2, the one I use the most is a charge card that has to be paid off at the end of the billing cycle) and pay in full at the end of the month.

I have an emergency savings, a "fun savings," and a "just in case you have to pay taxes next year" savings, in addition to some very modest investments.

Beverly Harzog's picture

Hi Corinne -- A lot of peple got in trouble during the recession, so you're not alone. I'm impressed that you put together a budget and that you stick to it. Sounds like you're on your way to a good credit history.

Guest's picture

Great article! I'm definitely a savvy spender, I only use my credit card to pay little things like my water and electric bill and Netflix account so I know I can pay the amount back in full every month. That and the consistent small payments show companies about your responsibility as a shopper and spender.

Beverly Harzog's picture

Hi Morgan -- Glad you enjoyed it! And yes, you're definitely a savvy spender. :)

Guest's picture

Savvy spender, all the way. I use my credit cards extensively for the cash back.

Beverly Harzog's picture

Hi Jenny -- Same here! I'm after the miles so it pays for my travel.

Guest's picture

Savy spender using 3 credit cards which get paid in full every month. I charge everything, even a $2.03 medical co-pay (One stress test, 10 separate bills). I usually have a little left of my monthly $20.00 bill........

Beverly Harzog's picture

Hi Rose -- Way to go!

Guest's picture

We are cautious spenders, and currently smart revolvers out of necessity after a recent move to a new city. We are in the process of paying down debt in general, and are thus hyper aware of the intricacies of credit/finance, but had an unexpected delay in my husband's employment in our new city.

We talk nearly daily about our excitement to pay down our 0% credit cards that we had to use to cover living expenses for a few months, and it feels like we are walking on the edge of a knife. No interest if we pay them off in time, but the uncertainty and risk are such a weight... it is not a healthy way to live! :( I HATE debt!!! Can't wait to breathe that huge sigh of relief that will come once all the cards are paid off and we are once again paying cash for all bills/purchases. Looking forward to then tackling student loans so we can develop a hefty savings account... all in due time!

Beverly Harzog's picture

Hi Liisa -- Kudos to you for paying down debt! I've been there and you describe the feeling perfectly! Sounds like you and your husband are a great financial team. :)

Guest's picture

I am a 'Cautious Spenders' because first thing I consider before spending through my credit card is that "Don't spend the money which you don't have", and moreover i am continuously seeking some reward points or such similar schemes which gives me credit points so that I can use them for my trips, restaurant bills etc.