Main Street

Credit Cards on the Decline

A credit-card-debtor nation no more? That may be taking it a bit far, but:

Credit card usage is slowing. Revolving credit — largely made up of credit card debt — fell by nearly 20% in November, the largest drop on record, according to the Federal Reserve, reflecting less borrowing by consumers and banks’ tighter lending standards. Through October, the number of new credit card accounts was down 46% from the same period in 2008, according to Equifax.

Not having a credit card makes all sorts of things more difficult, from renting a car to developing a good credit score, but then again…

Tim McFarlin, a consumer bankruptcy attorney in Irvine, Calif., 34, stopped using credit cards eight years ago because he thought the industry’s business practices were unfair to consumers. “Any time there’s even a hint of a financial issue in the consumer’s life, the credit card company will raise the interest rate to the high 20s, or 30%,” he says. “They’ll do anything they can to make life as difficult as possible.”

Last year, Congress enacted legislation that will make it more difficult for credit card issuers to raise interest rates on existing balances and charge certain fees. But those rules don’t take effect until Feb. 22, and in anticipation of the change, credit card companies have aggressively raised interest rates and fees, even for borrowers who pay their bills on time. In addition, credit card companies have lowered credit limits for many customers.

As John Cole writes,

I sense a lot of people now run with the baseline perception that banks and credit card companies exist only to screw their customers.

I mean, they’re sure not in it out of altruism…

Tags: credit cards