A local Fox affiliate yesterday broadcast an entertaining report that included a list of six purchases generally unwise to charge to your credit cards.

Credit card use that can be dumb

The six were:

1. Gambling spree–if you want to go on one, set a limit, take cash and leave your cards at home.
2. College tuition–usually a bad idea unless you know you can pay it off quickly.
3. Lavish wedding–save up; you don’t want to begin your marriage in debt, especially with credit card rates the way they are.
4. Plastic surgery–unless your ambition is to make out with a debt collector.
5. Tax bills–negotiate a payment plan with the IRS if you can’t settle a big tax bill immediately.
6. Luxury vacations–will those memories be as sweet when you’re sleeping in your car?

Credit card debt and changing times

It wasn’t that long ago that charging many of these to your credit cards would have raised few eyebrows. But things have changed recently in two important ways. First, credit card rates tend to be much higher now, and card debt can quickly cripple your personal finances. The second reason was summed up by Ruth Mata, a credit counselor, who told Fox:

“No job is secure right now…Do you have enough money in a savings so that if you lost your job you could take care of the important things like your house, your living expenses, and make that payment?”

Credit card use becoming more restrained

Of course, most Americans recognized these realities years ago, and adjusted their credit card use accordingly. In the last eight days, all three of the big credit bureaus have issued reports confirming continuing improvements in consumer debt.

The first of these came from Equifax. In a May 4 press release, one of the company’s senior executives observed: “Consumer behavior is now fueling much of this improved loan performance as borrowers are more aggressively paying off their outstanding debts, which is positively impacting their credit risk scores.”

The next day, TransUnion published its consumer Credit Risk Index for for the first quarter of 2011, which it described as improving at the best rate since 2008. One of its top analysts remarked: “The broad and steady decline in the Credit Risk Index, coupled with a moderate decrease in the demand for credit over the previous year suggests that consumers continue to live within their means.”

Fitch Ratings completed the trio yesterday, with its Credit Card Performance Indices for April. In a statement, Managing Director Michael Dean commented:

“Despite high jobless claims and unemployment, U.S. consumers are whittling away their debt levels while credit quality measures continue to improve. Tighter underwriting and otherwise benign economic conditions will likely spur further improvements for credit card ABS [asset-backed securities: when credit card companies package up and sell on debt to third-party investors] performance metrics through the second half of 2011.”

If you plan to model your wedding on the Royal Wedding of Prince William and Catherine Middleton, you’d better start saving now.

Published 05/12/11 (Modified 04/20/12)