Wednesday, February 3, 2010

Trends in Credit Use

There's an interesting graphic up at Man Vs. Debt showing the use of credit in various contexts.

The first chart shows credit use in eight major countries in dollars and the percentage of household expenses devoted to food within those countries. I'm not sure how the two are related since two different metrics are used -- its and apples-to-oranges comparison. Even individually, the total dollars an overall number and does not take into consideration the population. Showing "billions of dollars in credit card transactions per person" I believe would've been much more effective. Even with what we have, though, the disparity between China and the US is especially stark considering population.

The percent of expenses devoted to food is also a bit misleading. I understand that the author is trying to show an inverse correlation between this percentage (implying the societal value of food?) and credit use but even by itself, these data don't show much. For example, a higher percentage could occur if the overall expenses or total income for a household decrease. Ultimately this first chart seems too incredible for me to place any value in its findings.

I do believe that there has been a steady proliferation of credit use, and the second chart in the graphic is far more straight-forward in pointing that out. That in itself, can't be the problem; when used effectively credit can be a great tool. Indeed, I believe it's essential for many small businesses to grow, for example. Personally, I use credit to pay for anything I can, paying off my balance each month and accruing rewards (points, cash back, miles, etc.).

I consider irresponsible use to be a symptom of a deeper issue: ignorance. I don't blame anyone in particular, there just aren't too many passively available resources to educate people when they're most malleable: youth. Cultivating a greater understanding of fundamental finances and fiscal responsibility should be a staple of every teenagers' (at least, I would start even earlier) education as much as social studies or history. I wish I could offer a solution but hopefully an optimistic blogger's lament will hold you over until then.

Anyway, although I agree with Adam's sentiment, I believe his point would have been much more persuasive had he split up the first chart into two distinct graphs and developed his logic within each.

Man Vs. Debt [via Get Rich Slowly]

No comments:

Post a Comment