Credit cards are back, but in a more sensible way

WASHINGTON – America's torrid love affair with the credit card appears over. In its place is a less passionate, more stable relationship.

Wild spending and mounting debt characterized the run-up to the 2008 financial crisis. The subsequent recession was marked by frugality and a long slog back. Now Americans are comfortable enough to take on more debt, especially credit card debt. Just not too much.

That was evident in Federal Reserve data last week that showed the amount of credit extended to consumers grew at an annual rate of 9.7 percent in July. Revolving credit bank-issued credit cards and retail store cards grew at an annual rate of 7.4 percent. That was almost triple June's annualized rate of 2.5 percent.

The growth rate stands out when compared with last year, when the full-year rate of the growth of debt on bank cards and retail cards was 1.3 percent. Card debt was largely flat in the two previous years and it had fallen sharply in 2009 and 2010.

Signs of a credit bubble as before the crisis? Theodore Iacobuzio, MasterCard's vice president of global insights, a research unit, isn't worried.

"Yes, people are going back to using the credit card, but they're not going back to how they used them before," he said.

Before the financial crisis, Americans had about seven general-purpose credit cards per household, he said, excluding debit and store cards. Today the average is about four, he said.

"Cards are now being used by consumers as a way to navigate economic waters … not as wish fulfillment," Iacobuzio said. "I can't emphasize enough how much of a 180 this was."

Indeed, payment delinquency rates, which tend to be high when consumers have overextended themselves, are at record lows. From April through June, 2.25 percent of credit card accounts were delinquent.

It suggests two overlapping realities: Many Americans have sharply paid down their credit card debt and are wary of taking on more, while others who defaulted on their payments can no longer get credit cards.