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Millions shun credit cards

By Leslie McFadden ·
Monday, November 29, 2010
Posted: 4 pm ET

Millions of Americans are no longer charging on their credit cards. According to a quarterly analysis of credit card trends from TransUnion, one of three major credit-reporting agencies, more than 8 million consumers stopped actively using their bank credit cards during the past year.

In addition, the national 90-day credit card delinquency rate dropped to 0.83 percent in the third quarter of 2010, down 9.8 percent from the previous quarter and nearly 25 percent year over year.

In a news release, TransUnion explained that the shifts are "due in part to charge-offs in the higher risk segments of the population, more conservative spending in the low-risk segments, and significant efforts by consumers across the board to maintain the health of their credit card relationships as a financial cushion."

On the state level, Nevada had the highest incidence of credit card delinquencies at 1.28 percent, followed by Florida with 1.09 percent and Mississippi with 1.06 percent. Nebraska had the lowest credit card delinquency rate at 0.56 percent.

"On the delinquency side, the news remains good as consumers continue to show fiscal responsibility in paying down their credit card obligations," Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit, said in the news release. He predicted that credit card delinquencies could continue to decline, possibly to 0.75 percent by year-end.

The growing group of credit-inactive consumers

Many Americans were already doing without bank credit cards. "In 2009, well over 70 million consumers did not have an active, general-purpose bank issued credit card," Becker said. "During the course of one year, more than 8 million additional consumers joined these ranks, making it one of the fastest growing consumer segments."

Some consumers have even taken their aversion to credit card debt to an extreme -- by avoiding all types of debt. The Bankrate story, "Tired of debt? Live off the credit grid," explains the realities of a cash-only lifestyle.

The national average card debt per borrower actually increased for the first time in a year and a half to $4,964, up 0.28 percent from the previous quarter but down 11.54 percent compared to the third quarter last year. The state with the highest average for credit card debt per borrower was Alaska, with $7,159 worth of debt, while Iowa had the lowest state average with $3,807.

How has the recession impacted your credit card use?

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Debra James
December 07, 2010 at 2:06 pm

The recession has not changed how I use my credit cards; buy only what I can afford to pay off when the bill arrives. All of my cards offer some sort of reward, and I use them for everything except for purchases at small local merchants, because generally I don't spend enough to justify the high merchant fees they'd incur for accepting my card.

I honestly believe that the majority of people who had/have credit cards, but are now not using them, are those that had debt that they could not manage. I'm very curious to see the numbers for people who pay off their credit cards every month, and how many transactions per month these users generate.

December 06, 2010 at 1:40 am

I've had to reduce my spending a bit to accommodate reduced income and a few, very expensive repairs this past year. I haven't reduced the use of my cards because of the rewards feature I have on all of them, which has helped defray my costs even more.