Credit Card Use Down in 2010
When you are already struggling with debt, credit cards may be the only way to pay bills or buy necessities such as food and clothing. However, if credit card use gets out of control, the interest and fees can pile up fast, adding to an already difficult debt situation, and potentially leading to bankruptcy or foreclosure. And as over eight million people in Georgia and throughout the country stopped using credit cards over the past year, many are ensuring that credit cards do not add to their debt problems.
According to credit reporting agency TransUnion, two groups of credit card users are responsible for the decrease in credit card accounts. The first is people who chose to close accounts and cut up cards for various reasons mostly attributable to the recession, and the second is people whose cards were revoked by card companies due to unpaid bills.
Analyst Bill Kardekopf says that many of the eight million Americans who cut up their credit cards in 2010 did so voluntarily. “I think consumers have gotten a little bit smarter, and have gotten tired of those high interest rates and high penalties,” he said. “They are turning more toward the use of debit cards and cash, those old-fashioned forms of payment.”
The second group likely consists of consumers with a low credit record who had their cards cancelled after they were unable to make payments and fell into debt. Because of the high number of credit card defaults, companies have revised their practices, lowering credit limits and raising the requirements for obtaining a card.
The 62 million people with credit cards are spending less, too. In September 2009, the average credit card balance was $5,612. By September 2010, that average balance had dropped 13 percent to $4,964.
Source: Atlanta Journal-Constitution, “Credit card use down in Georgia”, Katie Leslie, 7 December 2010