Equifax`s National Consumer Credit Trends Report for May shows that bank credit card balances in April were down – way down. Balances were 28 percent below peak, at $531 billion. By comparison, in January 2009 they were at more than $730 billion. This may mean that more people are paying down debt and have more available credit, and signals increased consumer confidence and positive economic growth.
Amy Crews Cutts, Chief Economist and Equifax, said in a press release announcing the report that, “The combination of increased available credit and more timely payments among card borrowers has led to the recent growth in card lending.”
The increase in available credit goes hand-in-hand with increased use of credit cards instead of cash, something that many experts predict will to continue apace, with cash possibly being extinct by 2020 – just eight short years from now.
Retail Cards and Bank Cards
While bank card balances were down, retails card balances stayed the same, remaining at pre-recession levels. However, the number of retail card accounts is down by 22 percent from December 2010. Available credit for retail cards increased by about $5 billion, with rising credit limits driving the increase.
In early 2010, retail card limits fell by 15 percent, and in mid-2011 they fell another seven percent, so the stabilization and increase now is a very encouraging sign.
Bank card credit limits have been steady over the past six months, sitting at about 6.6 percent higher than they were at their lowest, in February 2011. Meanwhile the number of new bank cards issued in February 2012 was 37 percent higher than February the year before.
What Does Cash Have To Do With It?
The more credit is available to consumers and the less debt they are in, the easier it will be for them to pay for things with a credit card and live a cash-free existence. The trending credit statistics support the idea that cash is taking a backseat to credit nowadays, with at least one company going so far as to issue their employees a “cashless challenge.”
According to MasterCard`s Carlos Menendez, a group executive in their debit division, the company ran a program called “Month Without Cash” in their European regional offices last year. They asked employees to “commit to living cash-free, both in their work and personal lives,” and hundreds of employees accepted the challenge. Menendez said that the employees who participated in the project found that living without cash was “easier, safer and more convenient” and the experiment was such a success that MasterCard is now taking the challenge to their offices in the United States, Canada, Latin America, Africa, Asia, and the Middle East.
What Did Cash Ever Do To YOU?
What`s wrong with cash? For starters, it`s expensive to print, transport, and keep safe. Armored trucks and security guards would be in far less demand without transporting cash around the country. Cash is also far less secure for consumers to use. If you lose it, it`s lost – unlike a credit or debit card, which has fraud protection, and is insured for loss or theft. Prepaid cards are a more convenient option than cash as well, though they don`t come with the same set of guarantees and regulations that debit and credit cards do.
The recently announced effort by the Consumer Financial Protection Bureau to put those protections in place may be just another nail in cash`s coffin, as credit takes over and plastic proliferates.