WASHINGTON (TheStreet) — Americans are cutting their credit card debt and using their cards less, according to a new report from the Federal Reserve.
Revolving credit, which is primarily from credit cards, fell for the 17th consecutive month in February, declining at an annual rate of 13%. The $858.1 billion in revolving credit represents a $100 billion decrease since the fourth quarter of 2008.
Recent studies underscore some trends in credit card usage.
- The number of new credit cards issued declined 45% last year, according to Equifax Consumer Credit Trends.
- The average balance on Visa (V) - Get Report , MasterCard and American Express (AXP) - Get Report accounts dropped 5% to $5,434 in the fourth quarter from $5,729 a year earlier.
- According to a BIGresearch survey in January, 31% of respondents said they pay with cash more often, up from 23% a year earlier. The same study showed that 38% of consumers plan to pay down debt during the next three months, up from 34.4% in December.
- Issuers will reduce credit card lines by $2.1 trillion during the next 18 months, wiping out nearly 45% of the spending power U.S. consumers have on credit cards, predicts investment bank Oppenheimer.
During the past 18 months, banks cut credit limits for more than 50 million cardholders. If issuers cut credit lines by 45%, they will force consumers to rely on debit cards and cash. And that might not be a bad thing for the American consumer.
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