More than 8 million drop out of credit card use

[alienlovechild 75]

NEW YORK (AP) - More than 8 million consumers stopped using credit cards over the past year. The decline stems from a combination of consumer choices and bank actions.

An analysis by credit reporting agency TransUnion found that use of general purpose credit cards bearing MasterCard or Visa logos, or issued by Discover or American Express, fell more than 11 percent in the third quarter, compared with the July to September period last year.

About 62 million people now have an active card, compared with 70 million a year ago.

The Chicago company found that consumers in the subprime category, or 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.

"One can quite reasonably infer that's not voluntary," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. Banks have written off record amounts of credit card balances in recent years.

But a significant portion of the decrease in card usage reflects decisions by cardholders to stop using credit, Becker said. "They're simply either not purchasing as much or paying down balances."

Many of these individuals may have shifted to using debit cards. In the past several years the use of debit cards has grown steadily and now surpasses credit card use in both the number of transactions and dollar volume. Interest rate increases by credit card companies and reduced credit lines have contributed to that trend.

Still that doesn't mean consumers are shunning credit altogether. 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.

Yet it also reflects a 13 percent drop from $5,612 at the end of Sept. 2009.

Becker said the balance increase from the second quarter is mostly an indication that consumers are still under stress. Prior to the recession, he said, carrying a credit card balance was more of a lifestyle decision reflecting spending choices. "Now it's out of necessity," he said. "In times of financial distress, nobody wants to carry a balance. Where people can afford to pay things down, they do."

Unlike mortgages, credit card delinquencies are in a normal range. The rate of late payments continued to fall in the third quarter. Just 0.83 percent of payments were past due by 90 days or more, compared with 0.92 percent in the prior year period.

The third-quarter delinquency rate was highest in Nevada, at 1.28 percent, and Florida, at 1.09 percent. These two states have also been among the hardest hit by the housing crash and foreclosure crisis. Late payments were lowest in North Dakota, at 0.48 percent and South Dakota, at 0.53 percent.

http://www.breitbart.com/article.php?id=D9JQ36200&show_article=1

[candn 17]

I no longer use credit cards now that debit cards operate in the same way. No interest payments, items completely paid for, and no billing statements are wonderful! When I go on vacations, I can come home relieved that there are no credit card bills to pay for at the end of the day. I am actually enjoying being credit card free.

[thongd4me 69]

For most of my life I've had zero credit card debt;

then came the wonderful world of divorce as well

as the expenses of traveling to Thailand over the

last 7 years and the expenses of bringing my wife here.

Things are starting to normalize now and I currently

have a balance on only one out of 3 credit cards, with

the goal to eventually have a zero balance. Even after

I pay everything off I will keep the cards, because in

some places they accept one and not others.

I think the government should definitely step in

regarding the high interest rates that persist,

because after all, the banks have close to zero

percent charged when they borrow money from

the government and consumers alre always

the bagholders.

I got an offer for the Discover card in the mail -

I've always been curious about that one - anybody

out there had good or bad experience with it?

If I can get a zero rate for a year with that one it

can help reduce the rate I pay to the card I have

a balance with (Visa).

Edited November 30, 2010 by thongd4me

[rsn 135]

http://www.creditcards.com/reward.php

[scandal 951]

If I can get a zero rate for a year with that one it

can help reduce the rate I pay to the card I have

a balance with (Visa).

Just watch out for the "0%" Balance Transfer programs.

I've never in my life paid a dime in credit card interest, so it's a point of pride with me not to pay any fees.

Years ago (like >10) I used to take advantage of these to float a balance from one card to another, intentionally keeping a 0% interest on something I could pay cash for, but would just as soon take their free money and float it to the next.

However, in recent years virtually all of these offers come with a fee of either 3% or 4% or sometimes 5% of the balance transferred. That's effectively an up-front interest rate of that amount, so into the trash it goes. Free money I like, 3% money I have no use for. My mortgage is now a tax-deductible 4% which in my bracket comes out cheaper than 3%, so that's no bargain to me.

The one bank that seems to still send out offers of genuinely FREE balance transfers with no fees is Capital One. Now that my wife has a credit history building up (she's been here 1.5 years), she gets bombarded with offers, including Capital One. We haven't taken it up, but I've told her that if she wants to buy a car (she doesn't like driving mine), it would be cheaper to finance it for a year on a Cap One card than with a conventional car loan, so we might do that.

BTW - I went through my own divorce hell, ongoing child support, travel to Thailand to court and marry my wife. My credit and financial situation are well intact, thankfully, although I recognize that it's partially good fortune as well as good planning.

[thongd4me 69]

Just watch out for the "0%" Balance Transfer programs.

I've never in my life paid a dime in credit card interest, so it's a point of pride with me not to pay any fees.

Years ago (like >10) I used to take advantage of these to float a balance from one card to another, intentionally keeping a 0% interest on something I could pay cash for, but would just as soon take their free money and float it to the next.

However, in recent years virtually all of these offers come with a fee of either 3% or 4% or sometimes 5% of the balance transferred. That's effectively an up-front interest rate of that amount, so into the trash it goes. Free money I like, 3% money I have no use for. My mortgage is now a tax-deductible 4% which in my bracket comes out cheaper than 3%, so that's no bargain to me.

The one bank that seems to still send out offers of genuinely FREE balance transfers with no fees is Capital One. Now that my wife has a credit history building up (she's been here 1.5 years), she gets bombarded with offers, including Capital One. We haven't taken it up, but I've told her that if she wants to buy a car (she doesn't like driving mine), it would be cheaper to finance it for a year on a Cap One card than with a conventional car loan, so we might do that.

BTW - I went through my own divorce hell, ongoing child support, travel to Thailand to court and marry my wife. My credit and financial situation are well intact, thankfully, although I recognize that it's partially good fortune as well as good planning.

My visa's percentage rate is not unusually high (10%) but that's still enough to cause

some pain. When I got AMEX and HSBC cards with zero percentage rates, I just used

them as my expenses mounted and paid them off when when the 0% year was up as

their rates were higher than Visa.

I didn't transfer balances from Visa to either of them because I knew they came with hefty penalties where if they wouldn't get you one way, they would get you with another.

If Cap One in fact has zero balance transfers with no fees, then I would have a crack at

bringing my visa balance to zero within a year. Not everything is gloom and doom, as

I will probably be able to work in retirement and have a total income at about the same

that I enjoy now and not have to work full time. My wife is also working two jobs but I

take care of 100%+ of her expenses (including travel to Thailand) and she is focusing

on paying down her debt from her son's university fees. In a few years, after my kids

finish school, we should be in a very much improved situation, but for now the belts

have to be a little tight.

I also have no mortgage worries for my ex's house or the house we live in now.

I paid off a 15 year mortgage in 10 years and then filed for divorce.

korp khun krap & shalom - Happy Chanukah!

Edited December 1, 2010 by thongd4me