In the months leading up to the holiday season, many consumers have become concerned about credit card debt to the point where they’ve stopped using cards altogether.
This tactic may be working for struggling consumers as the average credit card balance declined to $4,964 in the third quarter of this year – a 13 percent drop from 2009’s figures.
“I think consumers have gotten a little bit smarter, and have gotten tired of those high interest rates and high penalties,” Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit, told The Atlanta-Journal Constitution. “They are turning more toward the use of debit cards and cash, those old-fashioned forms of payment.”
In addition, many are using this payment method to recover from bankruptcy, foreclosure and other ailments of the recent economic downturn, the news source says. Younger consumers are also turning away from credit, choosing debit in greater numbers to pay student loans and other bills.
However, in spite of the dramatic year-over-year decline, experts suggest many consumers may still be getting shut out of the credit card system. Charge offs, the number of bad loans written off by lenders, remained high for the quarter, hovering near 9 percent.