Consumers reduce credit card spending: study
NEW YORK (Reuters) - Americans in all age and income groups have reduced credit card use and cut spending on non-essential items as oil and food prices soar, home prices sink and lenders tighten credit, a new study shows.
Thirty-seven percent of consumers said they have reduced spending on credit cards, while just 10 percent said they are spending more, according to the study released on Wednesday by Javelin Strategy & Research of Pleasanton, California.
Meanwhile, 54 percent of consumers said they plan to spend less on "discretionary" or luxury items, while a mere 5 percent plan to spend more. The percentages of consumers spending less were even higher among consumers aged 35 to 64.
And 57 percent said they are "more careful" about eating at restaurants, where bills are often paid with plastic.
On Tuesday, the company behind Bennigan's and Steak & Ale filed for bankruptcy protection, joining a few other operators of casual dining chains that succumbed this year as more people chose to dine at home.
"Consumers are getting more cautious and the credit crunch is far from over," said Curtis Arnold, a consumer advocate and founder of CardRatings.com.
Americans in May had $961.8 billion of revolving debt, U.S. Federal Reserve data show, equal to roughly $3,150 per person. The total amount is up about 58 percent this decade.
Card issuers face pressure as credit problems brought about by the housing slump extend into other forms of debt, causing higher delinquencies and forcing even the wealthy to cut back.
Among 13 issuers polled by Javelin, nine said they have pared efforts to solicit new customers, while eight have reduced customer credit lines.
Several issuers reported lower second-quarter results from cards, including Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Washington Mutual Inc and American Express Co.
On July 21, Amex Chief Executive Kenneth Chenault called the U.S. credit situation "disappointing."
Regulators are keeping watch. The Fed said it received more than 41,000 public comments on proposed rules to thwart "unfair or deceptive" card practices, such as excessive rates and fees. (Two-thirds of the comments came on form letters.)
Fed Chairman Ben Bernanke, in announcing the proposed rules in May, said cardholders "should be better able to predict how their decisions and actions will affect their costs."
Arnold said many consumers are charging more day-to-day expenses, as issuers offer rebates to encourage such card use.
But he added that some issuers, including Wells Fargo & Co, have also begun reaching out, even to customers who pay bills on time, to prepare them in case times get tough.
"Yes, the card issuers want to collect finance charges, but they don't want their customers to be delinquent," Arnold said. "We've never before seen the industry start to reach out to their customers, saying, 'we know you're hurting.'"
Wells Fargo spokeswoman Lisa Westermann said that bank recently promoted counseling and automatic payment services to "select" customers, whose responses were "mostly positive."
Javelin's survey covered 1,500 consumers who answered questions online in April.
(Editing by Andre Grenon)
