Charge off rates are not a prime
factor for declining credit card debt, a new study by TransUnion
has revealed.
The study between Q1 2009 and Q1 2010 has
found consumers used their credit cards to make around $72bn more
in payments than purchases.
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“Many people in the financial services
industry believe charge-offs have been the leading factor in
declining credit card debt since the start of the recession,” said
Ezra Becker, vice president of research and consulting in
TransUnion’s financial services business unit.
“In fact, some have stated that charge-offs
account for the entire change in card balances over the past two to
three years. In reality, the dynamic is more complex. Our analysis
shows that consumers have made a concerted effort to pay down their
credit cards during these uncertain economic times.”
In the US, average credit card debt for the
period, per-borrower, recorded a drop of more than $600 from
$5,776 to $5,165. In the first quarter of 2011, the figures stood
at $4,679. The scenario is a sharp turnaround from five years ago
when consumers had made around $2.1bn more in purchases than
payments.
“All things being equal, we believe that
consumers, especially younger adults, will continue to have an
increasing preference to use their debit cards over credit cards,”
said Steve Chaouki, group vice president of TransUnion’s financial
services business unit.
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By GlobalData“However, the credit/debit card landscape is
still in transition. Regulatory and legislative proposals either
currently under discussion or recently enacted will impact the
industry significantly and could alter this payment preference
trend.”
The study is supported in its findings by two
separate surveys conducted in 2010 by the Federal Reserve and Zogby
International. The results supported the trend of increased debit
cards usage and reduced purchases-related usage of credit
cards.
