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New Study Finds Declining Credit Card Use in US

Javelin Strategy & Research has released a report on credit cards and consumer spending finding that Americans are cutting back on credit card use and having difficulty paying off balances. Javelin found "conservative spending behaviors as a result of the economic downturn and the ramifications of the mortgage crisis, soaring fuel costs and rising food prices."

“The sharp decline in credit card spending challenges the popular belief that more Americans are charging basic goods in order to sustain their quality of life,” said Jim Van Dyke, president of Javelin Strategy & Research. “Consumers are making deliberate cutbacks like shopping at superstores, eating out less and watching what they charge. We believe this is because most people have already been impacted by the downturn or they’re anticipating that we haven’t seen the worst of it. It’s very cautious behavior.”

Javelin analysts also found significant cutbacks among credit card issuers. Seven out of ten issuers have reduced efforts to solicit new customers and 62% have cut back the lines of credit they make available to consumers.

“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,” said Bruce Cundiff, director of payments research and consulting at Javelin Strategy & Research. “If the economy continues to decline, consumers will likely be forced to turn to credit, but find it unavailable when they need it most.”

The report also highlights increasing “pressure” on middle-income ($25-49K) and consumers ages 35 to 64. A high proportion of these groups are less able to save money and pay off credit card balances, and are putting fewer purchases on credit. Javelin also found the greatest decline in luxury goods spending among middle-income and middle-aged consumers.

Cundiff continued, “The middle-aged consumer is most adversely affected by the economic downturn in a number of ways and it is this group of consumers that needs the most assistance from financial institutions.”

Key Findings in the Credit Card Report:

  • 45% of those surveyed say their ability to contribute to savings has decreased.
  • 37% of consumers say they are using their credit cards less.
  • 28% of those surveyed say their ability to pay off their credit card balance has become more difficult.
  • One out of every three consumers said they are buying fewer basic goods.
  • 57% of those surveyed say they are more careful about how often they eat out at restaurants.
  • 46% of consumers say they are shopping more at superstores like Wal-Mart™ and Target™.

The report is mainly based on data collected from a random-sample panel of 1,500 respondents targeting representative proportions of gender, age and income as compared to the overall US online population. Executive data is based on an online survey collected from a sample of 13 credit card industry executives at top tier credit card issuers in May, 2008.

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