Major Trend Continues: Credit Card Debt Decreasing

This is a guest post by Bill Hardekopf, CEO of LowCards.com.

A significant trend has developed since the economy weakened during the fourth quarter of 2008: consumers continue to decrease their credit card balances.

According to the Federal Reserve’s G.19 monthly report released last week, the amount of revolving credit has decreased for the third consecutive quarter. In addition, the revolving credit figure has declined on an annualized basis for a record nine straight months. Credit card debt makes up the great majority of the revolving credit category.

Revolving credit decreased at an annual rate of 8.2% during the second quarter of 2009. This follows annualized declines of 8.9% during the first quarter of the year and 6.5% in the fourth quarter of 2008.

The total amount of revolving credit at the end of June was $917.0 billion, down $5.3 billion from the May number and $10.1 billion from April’s figures.

A number of factors seem to be playing into this decrease:

• Consumer concerns about their finances. “Consumers realize the fragile nature of their own financial situation. There are a tremendous number of people that have seen significant APR increases on their credit cards. They realize they simply can’t afford to charge more on their cards,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

• Issuers are cutting back on the credit limits extended to many customers. “Credit card companies are trying to minimize their risk as much as possible. A significant number of credit card customers have had their limits slashed. This obviously restricts the amount of money that can be charged on a credit card,” says Hardekopf.

• Issuers are also closing accounts. A number of issuers have terminated accounts that have seen little or no activity for a prolonged period of time.

  See the Federal Reserve’s latest G.19 report here.

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