During Capital One’s fourth quarter earnings call yesterday, CEO Richard Fairbank observed that, “the lack of consumer demand for credit, across our businesses, is striking.” Given the behavior of credit card companies during the past year, however, the lack of demand for credit should come as little surprise. Prior to the credit crunch, American consumers embarked on a massive spending spree fueled by cheap credit card rates, 0% APR balance transfers, and the willingness of credit card companies to extend significant lines of unsecured credit. In 2009, many of these factors disappeared, taking with them the confidence of credit card users.
As 2010 begins, a growing majority of the credit card wielding population has developed an animosity, if not outright hatred for the pieces of plastic sitting in their wallets. Credit cards, once relied upon to make day to day purchases or as emergency funding options, are now considered a financial albatross. Consumers who had utilized credit cards offering low fixed interest rates for life to consolidate debt awoke in 2009 to find that low fixed rates were neither fixed, now low anymore. Other consumers, many with impeccable credit scores, found their credit limits decreased so much they could no longer count on the card in their wallet to aid them in the event they actually needed to use it.
Ultimately, the “striking” lack of demand for credit cards isn’t striking at all. Credit card companies caused significant duress to consumers during one of the most tumultuous economic times in American history. The resulting lack of demand today is nothing less than a consumer revolt against credit card companies they now view as predatory. With time, consumers may change their view of credit cards and demand may increase. However, scores of consumers will never forgive credit card companies for the hardships they caused in 2009, and those people will likely cause a striking lack of demand to continue for the foreseeable future.
Jeffrey Weber
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February 20th, 2011 at 4:18 pm
You are correct. I am one of the millions of consumers who will never use credit cards again. I resent the fact the banks can continue to increase rates because they can and not because they price risking. That’s a bunch of bull. They see you are up to your eyeballs in debt but rather than letting your account be paid off at 10 or 12% they hike it up to 29% because they can. Well, guess what, all of our cards are completely paid off and we don’t owe own thin dime to those moneymongers. All cc’s are closed. We are strictly debit, check or cash now. They lost loyal customers. We made all of our payments, mostly paying off in full. What did the CC’s do? They switched payment dates, etc. just to get late fees. Not playing that game anymore. Done, Done, Done
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