Americans’ Credit Card Use Evolving


By Jeanine Skowronski for

Americans are using credit cards to their advantage.

Credit card debt as a share of disposable income dipped to 5.2 percent in the last quarter of 2013 -- the lowest level in more than a decade, finds new data from the American Bankers Association, or ABA.

Additionally, the share of cardholders who are transactors -- those who pay off their balances in full instead of carrying a balance forward -- increased from 28.6 to 29 percent, the highest share on record. The share of cardholders carrying a balance (revolvers) ticked down 0.1 percent to 41.7 percent during the same time period.

The stats indicate consumers have increasingly stopped thinking of credit cards as a debt instrument.

Instead, "people are looking at credit cards and saying what a great vehicle to make my purchases," explains Ken Clayton, executive director of the ABA's Card Policy Counsel, since the payment method is convenient and offers solid fraud protections.

They're also more apt to use a credit card that earns rewards. According to the ABA, the number of active rewards cards has increased by 18.4 percent from the fourth of quarter of 2008 to the fourth quarter of 2013, while the number of active non-rewards cards has declined 40.6 percent in the same timeframe.

Consumers' shift in mindset toward credit cards can be attributed to several factors.

"You still have the hangover of the financial crisis and that has sobered consumers," Clayton says. As a result, they've become less complacent about debt and more focused of smart spending habits.

Regulation introduced following the crisis also made issuers' lending standards more stringent. As such, "those that may use (a credit card) in different ways are getting less access to it," he says.

And improvements in the economy may also play a role, leaving Americans with more money in their bank accounts to pay off big purchases.

"They're still using a credit card to buy the refrigerator, because it's convenient and safe," Clayton says. "But they're in the position where they can pay for it at the end of the month."

The ABA's stats are derived from a nationally representative sample provided by Argus Information Services LLC. They aren't the first to indicate consumers are treating credit cards differently following the financial crisis. A recent Gallup poll found more people are eschewing credit cards entirely, with 29 percent of Americans not owning any credit cards, up from 22 percent in 2008.

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This article appears in: Personal Finance , Banking and Loans , Basics , Credit and Debt

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