Most consumers have a love-hate relationship with plastic. We love credit cards for the convenience and instant gratification they afford, we hate them when the bill comes due at the end of the month and we discover, again, that we’ve charged more than we meant to.
Over the past year, however, consumers’ attitude towards credit cards appears to have soured even further, particularly as card issuers have taken off the velvet gloves and cut back on credit limits, increased fees, and yanked interest rates skywards, even for consumers who always pay on time.
According to a recent poll of more than 1,200 cardholders released in the November 2009 issue of Consumer Reports, many cardholders are saying enough is enough. Although most analysts advice against closing credit accounts, because it can hurt one’s credit score, more than one in three of the consumers surveyed reported having paid off and closed a card account since January 2008. More than half of those who canceled did so in response to changes in their credit card terms imposed by their card issuer.
Two out of ten of the consumers polled felt they had been treated unfairly by card companies; only 41 percent of cardholders said they were “highly satisfied” with the credit card company they did business with. That is the lowest satisfaction rate of any service covered by Consumer Reports.
Almost half (45 percent) of the consumers in the survey are charging less on their credit cards; 43 percent are charging about the same. Only 11 percent are putting more charges on their cards than a year ago.
The survey also indicates that there are basically three types of credit card users. More than half of users (54 percent) pay their bills on time and pay off their card in full at the end of each month; this group mainly uses credit cards for convenience and to earn rewards. About one third of card users carry moderate balances forward on their cards, i.e. under $10,000 with a median debt of $2,554.
The last 13% of card users are those who struggle with credit card debt. In this group fall consumers with debts above $10,000 (the median debt for this group was $17,366). For many of the cardholders in this group, the high credit card debt resulted from financial emergencies, which they were ill prepared for. A full 44 percent of cardholders in this group said they were forced to rely on credit cards to meet their monthly expenses, and that they wouldn’t be able to survive financially over the next six months without their credit cards.
