Credit Card Use Down and (it looks like) Out

[SoCalDem]

http://www.mybanktracker.com/bank-news/2010/12/01/credit-card-use-down/

Over 8 million people have decided to give their credit cards the axe this past year as reported by CNBC. CNBC gathered data from TransUnion, a credit reporting agency to evaluate what is causing consumers to turn the other cheek when it comes to credit cards. According to the story the number of consumers with an active card fell from 70 million to 62 million in just one years time. The reasons behind this drop vary, but all surround the recession. The analysis pointed out that not all consumers got rid of their cards voluntarily, “those with low credit ratings, were believed to be without cards mostly because they were shut down by banks after payments fell behind or balances were written off.”

Americans Turn Away From Credit

A September study showed that many consumers prefer debit cards over credit cards when it comes to banking. The use of debit cards has been steadily increasing over the past few years and has now surpassed credit card usage. The departure from credit cards is an understandable move in this economic climate as consumers become more aware of the amount of money they are spending. The new focus of consumers is to decrease their debt and increase savings.

snip

Shift In Card Purpose

Along with the drop in actual credit card usage, credit card delinquencies are also decreasing meaning more Americans are able to make their payments on time. The CNBC article still pointed out that although credit card usage is down consumers that still use credit cards are relying pretty heavily on their cards “The average card balance stood at $4,964 in the quarter. That represented a slight increase from $4,951 at the end of the second quarter, and the first quarter-over-quarter increase in a more than a year.” The increase implies that consumers are still trying to make ends meet. Credit card usage has shifted from luxury purchases, clothing and vacations to necessities including groceries, gasoline and other day to day needs.

The decrease in debt is a good sign that individuals are getting back on track in terms of budgeting, but it is not necessarily an aid to the economic recovery. Until consumer spending increases there is little hope for a fast recovery.

[ixion]

1. The simple truth: When you're using cards for daily necessities

you're on a short path to financial ruin.

[HillbillyBob]

11. My first job other than working for family members farms or small biz

was at a grocery store in 1978 bagging.

I would see folks use credit cards to pay for groceries and thought that was going to be eventual trouble, but did not carry forward on that until I started seeing people later in the 80s sort of living on their credit cards, then of course getting behind. The path to ruin is right.

I personally never have had credit cards..always been too close to broke to really worry about credit scores. I had a gas card for a while, but when H Andrew blew away the company where I worked I we paid it off and cut it up.

We just recently got some credit standing back and bought a house.
We started with 0-credit score, but managed to get down payment, va loan by getting 2 low limit credit cards we use so very carefully.
We had to replace the old family mini van when it died so Nissan was the only one that would bet on us.
I have said before in 2002 we hit bottom from being repeatedly outsourced.
We went through what so many are dealing with now, back then and were given 'advice' and 'encouragement' from folks saying things like "Oh it can't be all that bad" shit it was a perfect storm of BAD.
I was recently disabled, my partners jobs losses really hurt him personally as if he failed when he did not.

If not for Second Harvest and a really run down house w/out many windows or heat, we would have had to live the winter of 2002/3 under a bridge and I was too sick for that.
We did not have any credit cards, it was hard as hell to hang on and I was not even sure we were. You really learn what you can do without.

I wish there had been some way to raise the cost of the house, but mortgage and car payment seem to be the only things that you just about have to finance. The house we bought was one of about 400 I looked at online, I went out and personally looked at nearly 100. We went through seven or 10 agents, who were pushing the Creative financing very hard, I finally found a realtor that said we will look in the price range and he had a broker who was more than willing to get us a fixed rate loan on 75g mtg. The house was priced at 45% below appraised, and last appraisal had been before the housing bubble. We LOOKED hard. The others wanted to stick us with a 140,000 mtg with interest only or adjustable rate mtgs.

[Lucky Luciano]

15. I use my AmEx for nearly everything, but I have to pay it all at the end of the month.

The points are good.

[Teaser]

17. Not necessarily

I do almost all my transactions on card and then pay it off at the end of the month. Less problems with paycheck coordination.

[Statistical]

21. Not really. I have used CC (USAA Platnum) for everything for last 3 years.

I mean everything gas, food, cable bill, cellphone, shopping, etc.

The only things I don't put on it is things that don't allow CC payments (mortgage, utilities, etc).

I pay it off in full each month, no interest. I get 1% cashback from USAA that has worked out to $2,800 so far (in 4 years).

Why would I pay cash or debit to do the exact same thing when USAA will pay me almost three grand to use their card?

[nadinbrzezinski]

22. Wrong, though that is what the CC like to say

I use my debit card, easier and safer than cash, and don't have to keep track of checks.

Anything we buy on CC is also paid by the end of the month.

[Divernan]

23. Not if you pay it off in full every month & get cash rebate on all charges (Discover Card)

Plus no annual fee. I charge all my groceries, gas, even the new stove I bought & pay it off monthly I get cash back as well.

If people can't pay off the charges before interest accrues, then I agree with you, they're getting deeper into debt every month, with no ability to get out of debt.

[ixion]

31. You're assuming most pay it off... that's not very likely

just sayin'...

[Mist]

2. Interesting to read this---Yesterday, when I was writing a check for

my brother-in-law's Yule gift of a bottle of vodka, I wrote a check. The manager commented that the ABC store (NC state liquor store) gets fewer than 10 check a month anymore. I was astonished--I use checks for everything locally. He said people use credit cards mostly, in the ABC store. (Maybe he meant debit cards as well.)

Combining my experience yesterday with the cited article, do people treat liquor as a necessity, along with food and gas? Maybe in this economy they do...

[SoCalDem]

4. I write one check a month..for the mortgage

and I only do that so I have the back of the check to PROVE that they cashed it on time (actually I am paid through Feb, but I don;t trust those bastards)

The "lost" an online payment I made and i am still fighting with them over that.,.since LAST February:grr:

All my other bills are made with online-banking & all spending is with my debit card

[phleshdef]

32. I have no credit cards, but I use my Visa bank card for everything.

Thats probably what he means.

[NNN0LHI]

3. I shifted away from using Debit or Credit cards years ago

I still have them but I prefer using cash for all the transactions I can. Otherwise I lose sight of the value of a dollar. I used to buy crap with plastic that I never would have bought if I had to pull the cash out.

Don

[SoCalDem]

5. Cash is still king, but I do not shop much at all, so the debit card it okay with me

and I check the account daily, just in case it;s ever compromised..

[NNN0LHI]

9. I guess is what I was trying to say was I have no self control when using plastic

I will buy stuff I don't even need when I use it at the store for regular purchases. Like I am using Monopoly money.

Now if I have a certain amount of money in my pocket I won't do that. I buy what I need and get the heck out. I go over the amount I carry with me once and a while and need to use the credit card to finish paying for a purchase. But not very often.

Don

[HillbillyBob]

18. I pay via online and debit card, but have a short list of bills too

since I cannot cover or afford more.
I tend to fritter away cash in pocket.

My partner has a saying passed down from his Depression Era grand father, Don't buy the cheapest, try to buy the last one of anything you will have to buy, so it lasts as long as you could need it.
Don't buy a plastic mixing bowl, buy a stainless one, you will only pay for it one time and it will last.

My best bet is to make 2 lists, one of stuff we are out of and have to replace, and the other is for things for future energy saving projects or need, but not today unless I find it deep discount on sale.
I try to arrange my shopping so I can hit several places that carry needed items on sale and buy almost nothing that is not on sale, need not want, but deciding the difference can be sticky. I try to buy local and less or at least recyclable packaging.
I don't buy disposable anything almost.

In order to survive on our now much more limited income.

We are trying to kill our electric bill. Not that we will be sitting in the dark I would rather go as efficient on the house so that one day we can buy solar panels n tell the power company to come cut the cord.

[PSPS]

6. Shoddy reporting

Over 8 million people have decided to give their credit cards the axe this past year as reported by CNBC.

Later, in the same paragraph,

The analysis pointed out that not all consumers got rid of their cards voluntarily, “those with low credit ratings, were believed to be without cards mostly because they were shut down by banks after payments fell behind or balances were written off.”

The fact is that many of these accounts were curtailed or closed by the bank. The cardholder didn't "decide to give their credit cards the axe." The bank made the decision for them.

[SoCalDem]

8. while that is true, it;s also true that many people are willingly giving the cards a rest

I think the spate of joblessness is scaring the bejeebus ouot of lots of people..

being debt-free is the best way to ride out tough financial times..

[Gormy Cuss]

19. I noticed that too.

Also this gem:
Along with the drop in actual credit card usage, credit card delinquencies are also decreasing meaning more Americans are able to make their payments on time.

Well, duh. Once a large number of people who were high risk have been removed from the pool the delinquencies OUGHT to drop.

[unhappycamper]

7. About the only time I use my card is when I go to GA in the spring.

I went on a you-can't-buy-it-unless-you-pay-cash-for-it regime about five or six years ago. I think my current Visa balance is less than $100 - won't know until I get my statement next week.

The only two things I owe money on are my condo and my cah.

[physioex]

12. What is wrong here?

Why is it that people don't associate their credit card purchases as something that you have to pay for. Are children not being taught how to basic finances in schools? How to manage your money?

[SoCalDem]

13. Apparently they are not

:(

[physioex]

16. Great....

All this rote learning for standardized testing in schools and kids come out learning no critical thinking skiils.

[Gormy Cuss]

20. You need to have money in order to manage it. That's one problem.

If you have no cash for current needs like utility payments and groceries, the credit card offers an instant loan -- usually at a pretty high cost, but without a formal loan application process and limited time to pay it back. Others use personal credit cards in lieu of securing business loans.

Another problem is the seductiveness of having high credit limits and low minimum payment plans and little understanding of the true cost. No, managing finances isn't usually taught in schools and neither is it a skill learned at home apparently. The recent changes in the law requiring higher minimum payments and disclosure of how long it would take to pay off the debt if only minimum payments are made was a step in the right direction.

[physioex]

10. I am going to give a different take.....

This is only for people who are discplined in their spending, and are capable of making full monthly payments. Credit cards can be a very useful tool in "sticking it" to the banks while earning you rewards money back. So go ahead use your credit cards for your necessities groceries, gasoline, and other items you can't go without.

[KharmaTrain]

14. Ya Think The 29% Interest Rates May Have Something To Do With It??

Surely a good number of those who aren't charging were cut off...either by the banks and their own common sense. With the interest rates so high (and sending millions who are stuck in the revolving door deeper into debt) one thinks twice about using the card...even when you know you can pay it off on time. Earlier this year we were shocked by a Visa bill that showed we hadn't paid on time (bullshit...and we proved it) and got a first hand look at how a balance of $200 turned into nearly $275 in just one month's time. Imagine that compounded over a year or several years. After spending the better part of a week playing telephone tag, the interest charges were removed but we've thought long and hard about using that card as long as those rates are so obscene.

I've also noticed many companies that prefer cash to credit...giving discounts in some cases to counteract the higher fees they have to pay to process the cards.

Of course the corporate media who needs a consumer economy to make money are making this sound like a bad thing. It's a shame so many got suckered into the "buy now, pay later" meme that has turned this country into a debtor nation.

[NNN0LHI]

25. People didn't get raises so they replaced cost of living increases with easy credit

After we get done working and paying our bills we now owe more money to the corporations than we make.

Its patterned after the Company Store concept.

Stop snowing by you yet? Wasn't bad here at all. Only about two inches of light stuff with a little drifting. Took me about 20 minutes for the whole job.

Don

[KharmaTrain]

27. The New Serfdom...

Hi Don,

I read recently that the average college graduate walks into the "real world" with a debt of 60k...and they start revolving the second the diploma gets handed out. I've also known of several people who have gone through Chapter 11 or some form of bankruptcy not once but a couple times. They got behind the 8-ball in the 80s and never dug themselves out. I think the Company store no longer applies as the worker gets nothing...the charge card is truly maxed out.

We're still getting some flakes here and pretty windy. I was out a little while ago and the high winds blew most the snow off the drive...took me a couple of minutes to knock down a couple small drifts. I'm sure you've seen worse...and should be fun to watch them try to play football in this stuff in a couple hours.

:hi:

[AsahinaKimi]

24. Good..

Credit Cards suck.

[Rex]

26. Once again us poor working stiff get blamed for not 'fixing' the economy.

Hey you know what? We could have a fast recover IF billionaire assholes stopped STEALING money from the Treasury. Also the tax breaks for the uber wealthy could have started the economy back up, but no they needed to steal more. Credit cards are garbage that makes a huge faceless company rich beyond words. Fuck them and all usury.

[sarcasmo]

28. Kick.

[Odin2005]

29. We must get away from a culture of debt.

For too long the PTB have encouraged us to become slaves of debt in order to keep the rotten Corporate Capitalist System going.

[muriel_volestrangler]

30. I'm surprised it was already that low; 70 million was just 30% of adults

So this is below 27%. The UK has 30 million credit card holders (admittedly, that's holders, as opposed to active users), which is about 60% of adults.

[Luciferous]

33. I use my credit card for gas and to pay for my daughter's school

lunches, but I always pay it off immediately. I don't need to use it for these purchases, it's just easier that way.