Below The Beltway

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Driving Our Way To Debt

by @ 8:59 am on August 28, 2005. Filed under Economics, Personal Finance

There’s a discussion going on at Outside The Beltway about this report that the use of credit cards for gasoline purchases has increased significantly in the last year.

I’ve used my credit cards to pay for gasoline for as long as I can remember. At first, it was just a convenience issue —- it was easier to pay at the pump than walk inside and pay cash. Now, I use a rewards-based credit card that gives extra rewards for purchases at gas stations. Since my wife and I pay our balances off every month, it makes sense to use to card for extra points. Credit cards are also useful to manage cash flow and keep track of spending.

The problem, of course, is that this isn’t what most people are doing. Most likely, the increased use of credit cards to pay for an everyday expense like gasoline is a response to the rising cost of gas by people who don’t have the money to pay for it. One question this brings to mind which I don’t have an answer to is —when people use credit cards like this does it mean that normal responses to supply and demand are no longer applicable ?

Paying for everyday expenses with credit cards, and not paying off the balance on a monthly basis, is usually a sign of someone on the verge of bankruptcy. In my bankruptcy practice, I’ve seen it more times than I care to recount. With the coming changes in Bankruptcy law, however, many of the people who might be candidates for bankruptcy 6-12 months from now will find the environment far less hospitable than it is now.

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