The credit card industry is changing. Some of the change is good, some of it may be bad. But the best news is, the credit card industry is changing.
It was recently reported that since the start of the year, eight million fewer people used a credit card.
There are not many industries that would be happy with losing eight million customers in only a year. However, they did not all walk away by choice. Whether through bankruptcy, charge-offs or account cancellations, many credit card users were simply told to hit the road. That’s fine. It’s for the better.
The recent stats were assembled and published by TransUnion. The reporting agency found that use of the four most popular credit cards, Visa, MasterCard, Discover and American Express, was collectively down by 11 percent in the third quarter of 2010 compared to the same period in 2009.
The credit card industry, on a national level, is taking the stance of the do-gooder, positing that many accounts were closed because the cardholder was behind on payments or had filed bankruptcy. While that is true to an extent, it is hardly the primary reason why credit card use is declining.
To turn a banking phrase, the bottom line is that people no longer trust Wall Street. Americans are turning to cash and savings, even though both are in short supply. The acts of the last two years on the part of the financial industry has created a tremendous schism between the masses and the businesses they once trusted to preserve and manage their money. The honeymoon is over.
An official with TransUnion, Ezra Becker, acknowledged as much in a recent Associated Press article. He communicated that while banks have written off large amounts of past due payments, more people are choosing the alternatives to credit cards. "They're simply either not purchasing as much or paying down balances," he added.
That being said, Americans are still reaching for plastic when they approach a cash register. Debit card use has grown substantially in the last year, now accounting for more total dollar volume and number of transactions than credit cards.
With that increase, we can rest assured that banks—the same entities that just lost eight million credit card users—will find ways to capitalize on debit cards. It’s just too big a pie for them to not seek a bigger slice. We can only advise that you observe your bank statements carefully, if you don’t already.
Regardless of the reason, a reduced rate of credit card use is a good thing. A large majority of personal bankruptcies in the Triangle region of North Carolina are tied directly to credit cards. Those that can’t be attributed directly still typically include substantial credit card debt. In short, they are almost always a factor. Maybe that will be changing soon. There’s always hope.