NFCC poll: Close to one in five consumers comfortable carrying debt

A recent National Foundation for Credit Counseling (NFCC) online poll revealed that close to one in five consumers, 18 percent, believe that carrying credit card debt over from month-to-month is a responsible way to manage his or her finances.

“This data suggests that not only are many Americans are using credit cards to fund a lifestyle their income can’t support, but they are comfortable doing so,” said Gail Cunningham, spokesperson for the NFCC.

Consumers need to be aware of the consequences associated with continually carrying credit card debt from month to month, some of which are below:

  • Interest on a credit card is typically calculated on an average daily balance. For those who carry a balance over from the previous cycle, interest is not only charged on the unpaid balance, but on any new purchases added to the balance.
  • With interested added onto the balance month after month, consumers end up paying interest on the interest.
  • Carrying a balance has the potential to negatively impact a person’s debt to credit ratio, one of the main components of credit scores.
  • A higher balance decreases the amount of credit available for future purchases. However, there can also be disadvantages to charging too little.

At the other end of the spectrum, a similar number of respondents, 21 percent, indicated that they do not use credit cards. While this approach to money management can avoid many financial pitfalls, it too has its problems:

  • Although it is possible to pay cash or use a debit card for daily expenses, these types of transactions are usually not reported to the credit bureau. Most people need credit for major purchases such as a house or car, but without a thick and positive credit file, credit may be denied.
  • Without credit cards, people miss out on the convenience of being able to purchase items or pay for services when cash is not readily available.
  • Carrying cash is risky, as the money could be lost or stolen, whereas credit cards often offer consumer protection features including those against loss.
  • Credit cards provide a safety net for emergency situations.

The majority of poll respondents, 61 percent, believe that paying credit card debt in full each month is the only responsible way to manage personal finances. The benefits associated with this type of behavior far outweigh any disadvantages and include the following:

  • Timely bill payments and a low credit utilization ratio are typically the top weighted elements in credit scoring models. Therefore, this type of behavior could have a positive impact on an individual’s credit scores.
  • The convenience of using credit can be enjoyed without paying any interest or penalties.
  • The entire line of credit remains available for future use.
  • Stress and worries of being over-extended are avoided.

What about you? Do you rely more heavily on either cash or credit, or do you fall somewhere in the middle? What's your preference? Let us know by leaving a comment!

Jessica Horton is a former copywriter and community manager at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.