There are at least 8 million people who are free of credit cards. According to reports by CNN, there is a drastic decline in credit card usage and the numbers are steadily increasing. The figures have gone up from 70 million to 78 million this year. With the recession last year when every penny mattered, many cardholders disposed their credit cards in a bid to cut down on expenses and reduce debts. This was a move to avoid the hike in fees too. As per reports, TransUnion was quoted as saying that the average credit card debt went down further by 11% in the last year alone. This was an unprecedented phenomenon. However, there were claims that consumers would never abandon their credit cards. But as per the present trend, consumers were moving away from the risk of debts and were creating more wealth through savings.
Most of the present trend is due to the charge offs in the high-risk segments. This was a direct fallout of the new card act regulations, which put restrictions on credit card companies and the hike in interest rates. As a result of this, the accounts of consumers who were considered “dead weight” by the issuers were written-off. Due to the rising defaults in debts during the recession, companies decided remove these risky accounts. Hence, both parties were getting out of risk with this move.
Some smart consumers saw an opportunity in this also by creating other new products to increase their wealth through savings. Recently, the Kardashian sisters launched a prepaid credit card which has now been canceled due to the exorbitant fees. The General Attorney took note of this, and pulled up the credit card companies for bad financial practices. This in turn saw a chain reaction, with the Kardashian sisters pulling out and canceling the credit card.
The future trend seems to be a rise in prepaid credit cards, which is expected to go up in 2013 by an astonishing $672 billion. Young adults seem to have developed a general distaste for credit cards, especially with the recent flop of the Kardashian card. These credit cards don`t even have the protections of the other regular banking products.
Hence, the bottom line is that investment and savings are going up, while there is a general decline in credit card usage. The switch over to prepaid credit cards is apparent. However, one has to wait and watch as to how things will unfold in the coming year.