Credit Card Popularity Drops

February 16, 2010

This article is included in these additional categories:

Analytics, Automated & MarTech | Financial Services | Regulatory

One in 10 Americans has given up on or lost the use of credit cards in the past eight months, according to a new CreditCards.com poll.

This number includes both consumers who have voluntarily given up credit cards and those who have had their cards involuntarily shut down due to poor credit.

Twenty-nine percent of poll respondents reported that they do not have a credit card in February 2010. This was a 52.6% increase from the 19% of consumers who did not have a credit card in June 2009.

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Issuers Take Negative Action ahead of CARD

The poll also shows card issuers have continued to raise interest rates, slash credit limits and impose other changes on millions of account holders in advance of extensive new restrictions that take effect Feb. 22, 2010 as part of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. When the Act takes effect, card issuers will no longer be able to change interest rates on cards for the first 12 months of a card relationship and will be prohibited from changing rates at all on existing balances, limiting their ability to adjust prices to reflect changes in customer risk.

Thirty-eight percent of respondents reported having their annual percentage rate (APR) hiked in February 2010, compared to 30% in June 2009. Thirteen had their credit limit decreased in February 2010, compared to about 12% in June 2009.

Other negative card issuer actions which have become increasingly common with respondents since June 2009 include offering an incentive to close a card (about 8%, up from about 7%) and changing a fixed rate to a variable rate (about 13%, up from about 11%).

In addition, fewer respondents report getting their credit limit increased. Thirty percent of respondents reported having their credit limit increased this month, compared to 33% in June 2009. Overall, 48% of respondents said they had been notified of one or more unilateral changes to their credit card agreements during the past 12 months, compared to 42% in June 2009.

Credit Card Debt Falls

The most recent Federal Reserve data on consumer credit reflects the increasing number of consumers who do not have a credit card. In December 2009, revolving credit,which mostly consists of credit card debt, fell 13.9%, from $957.3 billion to $866 billion, as reported in Retailer Daily.

In addition, CreditCards.com data indicates that the national average credit card annual percentage rate (APR) on December 30, 2009 was 12.97%, up from 12.71% on November 25, 2009 and 11.94% on June 25, 2009. According to CreditCards.com, the national average APR declined slightly within the month of December 2009, mostly due to rate cuts on two Bank of America cards. CreditCards.com still predicts rates will move higher this year, as banks raise APRs and reduce access to credit to guard against losses associated with high unemployment and the upcoming CARD Act.

About the Survey: The 2010 survey was conducted from Feb. 5-7, 2010, by GfK Roper Public Affairs & Media on behalf of CreditCards.com. Random digit dialing phone interviews were completed with 1,004 adults 18 years old or older. The 2009 survey was conducted from June 26-28, 2009 among 1,004 adults 18 years of age or over. The raw data were then weighted by a custom designed computer program that automatically developed a weighting factor for each respondent, employing five variables: age, sex, education, race and geographic region.

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