There’s been a lot of hype and handwringing over reports that U.S. credit card debt has reached a record $1 trillion. That’s framed either as an alarm for the economy or a cautionary tale about consumer behavior. But neither of those things seem to be true.

It’s a big mistake to do historical comparisons of financial data without adjusting for inflation. A lot of impressive earnings, from banks to airlines, aren’t so impressive when you realize that it’s the numbers that are inflated, rather than the company’s financial performance. The same holds true for comparing credit card debt. It’s much more useful to look at ratios and put something like credit card debt in context.

Delinquencies are up, but as a percentage of consumer cash on hand total credit card balances are at an historic low.

You: OMG credit card debt just hit a record $1 tril…

Me: stop right there. credit card debt is just 6% of $$$ people have in the bank, around the lowest %age in 20 years pic.twitter.com/Vb2Gk6lAK3

— Callie Cox (@callieabost) August 8, 2023

Leaving aside the period of pandemic cash peaks, household debt cost as a percentage of income is near a 40 year low. And people are paying off their credit cards across income classes, this isn’t a story of better-off consumers doing well and leaving others behind.

Credit cards are a tool, and they can be used effectively and to a consumer’s advantage or they can be used – based on poor choices – to put consumers in a bad financial position. It’s a mechanism by which consumers make choices for good or ill, not the cause (which would imply lack of volution and culpability). Credit cards:

• Provide better consumer protections than other payment methods. Cash can be stolen, your checking account can be drained by fraudulent debit use and you’re reliant on a bank’s good graces to restore you, but with a credit card the fraudulent charges you report haven’t caused funds to be removed from your account in the first place.

• Often provide insurance coverage, whether it’s refunds when a merchant won’t take back what you’ve purchased, an extended warranty, or trip and baggage delay coverage when your flight goes awry.

• Offer rewards and rebates for your spending.

• And actually offer financing! You shouldn’t focus on rewards, and need to be careful not to overspend, but people often borrow on their credit cards because they have income-smoothing needs and it’s better than the next-best alternative. They get better terms from their card issuer than they would with a payday loan, and might need to get a car repaired to go to work or cover childcare or health care needs.

Credit conditions have tightened somewhat (by Fed design, to shrink the money supply) and that’s meant it’s tougher to get a credit card for some consumers right now. That’s hardly the only area where credit tightening plays out. It’s tougher to get business financing and loans on commercial real estate, too.

Spending on credit cards and earning rewards is valuable if and only if you pay off your bills in full each month and you do not spend more than you otherwise would. Some people don’t feel the money is real when they aren’t doling out cash in an envelope.