Consumers jumping off the credit card wagon

It's not all voluntary, and it's not always a decision made of virtuous intent. But for a variety of reasons, consumers are rapidly cutting their credit card use.

Marketwatch reports that consumers cut their borrowing by nearly $12 billion in August, a 5.8% annualized rate of decline. Nearly $10 billion of that cut was credit card debt. That was the 11th consecutive month in which credit card debt declined, which is the longest stretch since this sort of thing has been tracked.

A lot of this is forced budget tightening, but there's a decent amount of anger mixed in too. We've reported about some of the changes credit card companies and banks have been making in recent months, and these changes are evidently rubbing many consumers the wrong way.

Credit-card holders are so irritated that 32% of them told Consumer Reports in a recent survey that they have paid off or closed a card in the last 18 months. Half of those who canceled did so because they were peeved by recent actions credit-card issuers took, such as cutting limits, hiking interest rates, jacking up fees or imposing new charges. (my emphasis)

Among those holding credit cards, 21% of respondents said they were treated unfairly by card companies. Less than half, 41%, said they were highly satisfied with their card issuer.

While the process is painful and the result is a sluggish economic recovery, in the long run our economy is only going to be as healthy as the underlying consumers it is comprised of. So to the extent that we are being forced off our credit card addiction, this is almost surely a positive long-term development.
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Mark Biller is Sound Mind Investing's Executive Editor. Visit www.soundmindinvesting.com to learn more.