Credit is Cheap, Why Aren’t You Borrowing Money?

Last week, the Federal Reserve announced that it would be keeping interest rates low for another two years. Under ordinary circumstances, people like you and I would be jumping for joy. Credit card interest rates would stay low, loan interest rates would stay low and borrowing would probably increase. In fact, the federal government hopes we’d be lining up for miles to borrow money and reinvigorate this economy given their move. But wait a second, why would that probably not be the case this time around?

Sad Child & Family (Courtesy Ed Yourdon on Flickr)

Well, take a look at this New York Times article published on Sunday. The Consumer Sentiment Index, the measure of how we feel about the economy, is lower now than it was during the depths of the recession in early 2009. Frankly, as American, we’re still worried about the near-term outlook of our economy.

But it’s not just hard and fast figures that can point us to the whole story. We also have to take a look at the anecdotal evidence. Americans are in a more precarious money position today. More of us are living paycheck to paycheck. Many of us were financially burned in the recession (whether through credit cards or housing) and cut back on our spending and borrowing. And most importantly, we’re more conscious now of what behavior got us into the financial mess in the first place.

So, excuse us Federal Reserve, as we’re not going to run out and borrow money like flies attracted to the bug-zapping light. We’re consciously deciding to step back and say, “I’m going to live within my means.” And for that, we all deserve a nice slice of pie and a gold star.

How do you feel about borrowing money? Take our poll: