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Credit Card Use Is Declining Among Those Concerned About Economy

Francine L. Huff
LoanBiz Columnist

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Americans are cutting back on using credit cards as the economy continues to struggle. Credit card companies, in turn, are sending out fewer solicitations to customers. These changes and a worsening economy could have some negative repercussions for consumers down the line.

Feeling Squeezed

A Javelin Strategy & Research report found that many people are exercising caution before charging even inexpensive goods to their credit cards. Of those surveyed, 37% said they are using their credit cards less. Middle-income folks who make $25,000 to $49,000 a year are especially having a tough time paying off credit card balances, according to the report. People aged 35 to 64 are also struggling. High food prices, soaring gas costs, and housing woes are among the factors contributing to the tough times.

Credit Card Companies Back Off

Known in the past for bombarding consumers with credit card solicitations, many companies are now scaling back mailings. The study found that seven out of ten companies reduced solicitations to customers and 62% have cut back their customers' lines of credit. Credit card companies are already under pressure because of a legislative battle over fees, interest rate hikes, hidden charges, and other issues.

"From declining consumer use, rising risk levels, and possible new merchant fee legislation, the credit card industry is taking several hits right now, which could have unintended consequences on Americans," Bruce Cundiff, director of payments research and consulting at Javelin Strategy & Research, told Payments News. "If the economy continues to decline, consumers will likely be forced to turn to credit, but find it unavailable when they need it most."

Consumers Should Be Proactive

So what can people do to avoid running into serious problems with credit cards?
  • Use cash for as many purchases as possible.
  • Pay more than the minimum balance due each month to trim the amount of overall interest paid.
  • Shop around for a credit card that offers a lower rate and no annual fees.
  • Pay credit card bills on time to avoid late fees and interest rate hikes.
These are lean economic times for many people. The Javelin Strategy & Research study found that middle-class Americans are cutting back on purchasing luxury goods and sticking with the basics. That sounds like a smart plan for anyone concerned about where the economy may be headed next.

Sources:
Payments News

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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