3. Old Habits Die Hard
As Americans get older and more mature, they still rely heavily on credit cards. While 20-year-olds use more than half their available credit on average, 50-year-olds use almost 40 percent.
The study finds that individuals have “very stable” credit habits over time. Some might typically use more of their available credit and others less, but each person's use of credit cards doesn't vary much during the course of his or her life. Finances are sometimes disrupted by shocks—perhaps a car repair, a medical emergency, or even a bonus—that do cause people to alter their credit habits. Any disruption is temporary. Within two years, an individual's credit use is mostly back to its ordinary pattern.
4. If You Can Borrow More, You Probably Will
Americans borrow more in good times and less during recessions. The driving factor isn’t our mood about the economy. Borrowing seems driven by our credit limits. When banks offer us a higher limit, we use it. When they cut us off, we tighten our belts.
Banks are constantly adjusting how much credit they give customers. The average credit-card limit rose about 40 percent from 2000 to 2008, then plunged about 40 percent during 2009.
Credit limits have the biggest effects on people who carry debt forward from month to month. When offered a 10 percent increase in credit limits, these "revolvers" subsequently increase their debt by 9.99 percent, the study finds. In other words, revolvers—the majority of U.S. consumers—typically use almost every extra cent offered by their credit card issuers.
This is a striking statistic, but it’s hard to know what conclusion to draw from it. Are most people just incapable of resisting temptation? Or are they in such desperate economic straits that they need more credit to get by? It may be a combination of the two, and the study’s co-authors are planning follow-up studies on these questions.