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Credit card trends: so much we don’t know

by Indexcreditcards Indexcreditcards
Credit card trends: so much we don’t know

The December 2010 edition of The Nilson Report, published by a leader in consumer-payment system research, included an analysis of how consumer payment systems would change between 2005 and 2015. It made interesting reading for executives of credit card companies.

Credit card use changing

The study estimated how the rankings of five payment methods would change:

  1. Cash would drop from the No. 1 spot to No. 2
  2. Checks would fall from No. 2 to the bottom
  3. Credit cards would stay at No. 3 across the 10-year period
  4. Debit cards would leap from fourth place to No. 1
  5. All other payment methods would rise from the No. 5 to No. 4

Credit card trends and unknowables

Unfortunately, this blogger has yet to take out a subscription to The Nilson Report ($1,295 a year) so we only have the headline analysis to go on, and no idea on how conclusions were reached. However, we are surprised by how well The Nilson Report believes credit card use could hold up. It as Donald Rumsfeld once observed on a somewhat different topic:

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”

There certainly are countless known unknowns and unknown unknowns when it comes to credit card trends. But we do know, as reported here Dec. 6, that a National Retail Federation® survey found that only 27.6 percent of respondents said they would use their credit cards over the 2010 holiday season, and that TransUnion, one of the big credit bureaus, said in November that eight million Americans had stopped using general purpose credit cards completely. We also know about the explosive growth of prepaid credit cards.

Credit cards and debit cards

One significant unknown is the extent to which debit card use will be affected by changes in “interchange rates” (the cut of the transaction value taken from merchants by banks every time a card is swiped). Regulations for interchange rates are currently being finalized by the Federal Reserve. Many expect these new rules to have a real impact on big banks’ ability to offer attractive rewards, and could push consumers back into the arms of credit card companies, which won’t be affected by the proposals.

Another unknown is how deterred consumers might be by the record credit card rates that issuers are now charging. CNN Money said Friday that credit card rates have jumped by more than 20 percent over the last couple of years.

Those who work for the big credit card companies might be wise to avoid complacency, even after they’ve read The Nilson Report. Otherwise, the day may come when they, too, can’t afford the subscription.

Disclaimer:The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we cannot guarantee the accuracy of the information in this article. Reasonable efforts are made to maintain accurate information. See the online credit card application for full terms and conditions on offers and rewards. Please verify all terms and conditions of any credit card prior to applying.

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