Two surveys were recently released pertaining to consumer credit cards; one which polled consumers, and the other questioning bank loan officers. The results show that American consumers having been working harder to manage their credit card debt during the recession which began in 2008-2009.
Gallup Economy and Personal Finance Survey
A poll by the Gallup News Service entitled Economy and Personal Finance surveyed 1,026 U.S. adults about personal finance including the use of credit cards. Compared to pre-recession levels, Americans are carrying less credit card debt, own fewer credit cards, and are more likely to pay off their credit card bill in full each month. Only third of those who have credit cards carry a balance each month which is the lowest level since Gallup began collecting the data in 2001. In the early 2000’s the percentage of credit card owners carrying a monthly balance was 41%-45%.
More Americans are living without credit cards entirely. 29% of the people surveyed by Gallup said that they did not have any credit cards which is way up from the 17% who were credit card free in 2002. And, those that do use credit cards are carrying slightly fewer in their wallets. The average amount of credit card debt that people carry is down to $2,426 which is over $500 less than the 2008, pre-recession level of $2,941.
Some of this change in credit card behavior is by consumer choice in that Americans have been frightened by the recession and have been leery of taking on too much debt. On the other hand, those that have wanted a new credit card may have been turned down as lenders tightened borrower requirements making credit harder to get. Debt level was also impacted by the Credit Card Act of 2009 which prevented lenders from raising interest rates on existing balances and forced payments to be credited to balances with the highest interest rate.
Federal Reserve Senior Loan Officer Survey
The findings of the Gallup poll concurred with the Federal Reserve’s report on their April 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices. The 73 page report covers questions that were asked to the loan officers about commercial and industrial lending, commercial real estate lending, residential real estate lending, and consumer lending (including credit cards). Responses were received 97 banks in the U.S., either domestic banks or U.S. branches of foreign banks. For consumers looking to for credit cards, the results were mostly positive compared to 2013.
The survey found that it has been more difficult for consumers to qualify for a credit card during the recession, and there has been a contraction in consumer credit card loans primarily due to the borrowers’ desire for less debt and Card Act of 2009. Specifically, the loan officers pointed to the provisions of the act that prevent banks from increasing interest rates on pre-existing balances, require an adult cosigner for borrowers under 21, and force the payments to be credited to the debts with the highest interest rates.
However, there are signs that the credit card market is beginning to change. For the first quarter of 2014, the banks said that they were either more willing, or at least as willing, to make consumer loans than in 2013. Furthermore, many banks had increased credit limits on credit cards. These are positive signs that the economy is continuing to recover.