Use of credit cards is beginning to trail off as more people start preferring to use cash. Fewer people are willing to go into debt and less willing to borrow money for purchases by using a credit card. Card use has been declining for some time, and higher interest rates and fees make credit cards less attractive to the cost conscious.
Major credit bureau notes decline in credit card use
Credit bureau TransUnion has noted a decline in the use of general purpose credit cards, according to Daily Finance. The credit rating bureau asserted in a recently released study that nearly 8 million people quit using a general purpose credit card, the kind normally issued by a bank. The number of people who either don’t have or don’t use a credit card now is more than 78 million, according to TransUnion. TransUnion also noted that credit card delinquencies declined by 9.8 percent during the third quarter of 2010. TransUnion credit rating bureau compiles data used in determining a persons’ credit score.
Federal Reserve notes less credit card use
TransUnion also noted that consumers were still using other forms of credit, such as installment loans, despite the drop in credit card use. The Federal Reserve, according to the Wall Street Journal, observed that credit card use was still declining in February of 2011, but non-revolving credit use was increasing. Revolving credit use, or bank-extended lines of credit and credit cards, declined by $2.71 billion during February 2011. Revolving credit use has only risen once since 2008. Non-revolving credit, or non-mortgage consumer loans such as auto loans or personal loans, increased by more than $10 billion during the month of February. The increase was likely driven by auto sales, which have been increasing steadily for the past few months. The Federal Reserve data indicates that TransUnion’s assessment of declining use of credit cards and continued use of other forms of credit is plausible.
Interest rates and fees on the rise
Because of the Credit Card Accountability, Responsibility and Disclosure Act (the CARD Act), banks have stricter rules about how they can change interest rates. The rates are not capped, according to Fox News, but the card issuing institution is prohibited from raising interest rates without a certain amount of notice. The average interest rate on credit cards is beginning to slowly rise along with the number of memberships fees that banks are charging customers.