ADVERTISEMENT

Study: Credit cards face bleak future

By Cara Henis

Charging used to be en vogue. The general adage was if you want it, put it on plastic. However, as reeling credit card companies continue to pass on their losses to customers, many consumers are abandoning their dependence on credit.  

Research from TowerGroup, a research firm specializing in financial industries, indicates that consumers may permanently dump credit cards in favor of debit and prepaid options as a possible consequence of the more arduous card attainment processes and higher fees.

As of now, TowerGroup says that credit card companies face a bleak market. Delinquencies are up, card usage is down. Increases in card use aren't foreseen to occur until mid-2011. Even then, the increase is projected as modest.

Coupled with this dire forecast are the changes imposed on card issuers under the new Credit CARD Act of 2009.

"It's evident there is no single cause behind U.S. credit card issuers' current business woes, but pressure is mounting for issuers to adjust their business strategies and rebuild," said Dennis Moroney, research director for bank cards at TowerGroup, in a press release.

According to TowerGroup, issuers will face the risk that consumers will get used to having reduced access to credit and will then change their purchasing behavior permanently, meaning the need for credit will vastly decline in future.

"Charge it" may be replaced with a "pay now" or a "let's save" mentality.

"The United States is clearly seeing a trend away from the days of unharnessed overconsumption," said Brian Riley, who is also a research director of bank cards at TowerGroup, in a press release. "Putting it simply, today's consumers are saving more and spending less because they are unsure of the future."

See related: Q&A with John Grund: A look at the future of credit cards, A comprehensive guide to the Credit CARD Act of 2009, Credit card interest rates rise ahead of new law

Published: July 21, 2009


Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.




Follow Us


Updated: 10-01-2016


Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.


ADVERTISEMENT