Has the Recession and Debt woes taught people a lesson about credit card debt?

In late 90’s there was the “internet boom” and then in the 2000’s the “housing boom”. With these booms people had tremendous “paper” wealth created and therefore very comfortable taking on large amounts of debt. This combined with credit card and mortgage companies’ willingness to lend record amounts of money and credit lines led to huge personal financial hardships when the mortgage crisis arrived and the significant amount of perceived wealth disappeared when home values dropped significantly.rnNot only did people lose fortunes, given the highly leveraged natures of mortgage loans a large percentage of people now owe more on their home than it is worth. To make matters worse, credit card companies significantly reduced available credit lines to those with balances. With limited available credit, these customers show as high risk customers since their credit utilization rates are very high. So what do the credit card companies do? They significantly increase the credit card rates on these now “higher risk” accounts. rnFor consumers this all makes for the “perfect storm” of debt issues and leaves many looking for effective debt relief options. As a result, companies in the credit counseling, debt settlement (also referred to as debt negotiation) industry have been booming. rnOver the last two years consumers have been heavily focused on reducing their debt levels significantly. For many people this is the first time in their lifetime they’ve had to actually focus on reducing their debt levels and for many it’s a very hard lesson. This means fewer vacations, less impulse buying, and a greater understanding of their actual monthly cash flows.rnDebt negotiation is a process where a consumer can negotiate down their balances with their credit company. The credit card company agrees to a significantly lower balance (as low as 30% of the current balance) if the consumer agrees to pay off the credit card debt in full. Many have taken advantage of this opportunity over the past two years and therefore have significantly reduced their debt levels through debt negotiation. Sites such as www.BlueDebt.org teach people how to do this themselves. rnIn 2011 with the economy beginning to grow again and the job market improving will consumers now be much more conservative when it comes to taking on debt by spending more than they currently have available? Early signs are that many are reverting back to their old spending ways by taking more vacations, new car purchases, and more impulse buying. In December the amount of revolving debt increased for the first time after declining over the previous 24 months. The question remains whether people are merely postponing their spending or whether the dramatic financial events of the past two years will fundamentally change spending and saving habits going forward.