Cash is king — again

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a fistful of cashThe numbers are rolling in, and by all accounts, Americans have finally bucked up and told their credit cards, "It's not me, it's you." While consumer spending has inched up a bit, it's not the big credit card networks that are benefiting, which means we're opting more often to spend the money that's already in our pockets. According to this article, credit card usage this year is down for Visa, MasterCard and Discover, while it's flat for American Express.

We're still using our debit cards -- 15% more this year than last -- but we're not financing everything from breakfast to bedroom sets anymore. While this may hurt us in terms of our short-term recovery, since consumer spending is estimated to make up around 70% of our total economy, in the long run it will make us stronger, says Richard Barrington, personal finance expert for MoneyRates.com.

"It's indicative of the fact that consumers are spending less," Barrington tells WalletPop. "They're paying down debt and household debt service ratios are coming down. What that means is some debts are being written off, but to a large extent, people are trying to live within their means," he says.

Interestingly, our nearly decade-long infatuation with gift cards also appears to be on the wane; today, Americans are buying fewer of them and selling the ones they have at a discount for a quick cash infusion. There are other indications that we might be embracing greenbacks more in the future.

Thanks to a recent ruling by the Justice Department, stores have more autonomy to offer discounts to people willing to pay cash. (We told you about the benefits and the drawbacks of this new ruling.) This could have the effect of making plastic even less attractive for some, even as some credit cards compete for new customers by offering lavish cash rewards, which we pointed out in this recent story.

Barrington says he hopes the new embrace of cold, hard cash is here to stay. "I think people are changing their habits for the better," he says, advising, "Take your credit card out of your wallet. It removes the opportunity for you to get in trouble."
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