Millions of consumers stopped using their credit cards altogether in 2010, though a portion of that was due to some being unable to pay their credit card debt at all, according to a report from the Minneapolis Star-Tribune. In all, the number of Americans with at least one credit card dipped to 62 million last year, down from 70 million in 2009.
Instead of taking on credit card debt to make everyday purchases, most who no longer have these accounts rely largely on debit instead, the report said. This option offers most of the same features as credit, such as the ability to make purchases online, and may also have fewer fees associated with it.
However, there are headaches associated with debit as well, the report said. Some companies, such as rental services or hotels, may charge hundreds of dollars to the cards at the time of purchase, as a means of securing their property in case of damage. But that may change with the new consumer focus on using these cards.
The overall shift to the use of debit is similar to the way credit cards gained popularity in the late 1980s, the report said. At that time, lenders sent out millions of preapproved cards to consumers. But since the current recession set in, they've effectively done the opposite, revoking many checking accounts over delinquent and defaulted credit card debt.
"When an account gets charged off, what normally happens is that the account is closed," Darryl Dahlheimer, program director for Lutheran Social Service Financial Counseling Service in the Twin Cities, told the newspaper. "It's an involuntarily thing on the part of the card-holder. Nobody wants that to happen because it's a big black mark on your credit report, you lose your credit cards and you're still liable for the debt."
Overall, most major lenders have seen their rates of defaulted and delinquent credit card debt decline over the last several months as consumers made a greater effort to improve their credit health and reduce their balances. This in turn has lead to higher profits in the industry.