Consumers to Banks: Take this Card and Shove it
Consumers are unhappy with their banks. No surprise there. What is remarkable is the tangible way in which they are expressing their unhappiness. Credit card debt declined 13.1% in August. This was the 11th straight month of decline, an all-time record.
As further proof of a paradigm shift in credit card addiction, debit card transactions are now exceeding credit card transactions for the first time ever. (Source: MarketWatch)
The unspoken takeaway from this news is that folks are closing credit card accounts despite having been told repeatedly by the credit-obsessed that “this can hurt your credit score.” Guess what Mr. FICO: WE DON’T CARE! You should adjust your credit score algorithm to reflect our reality, not yours.
All of this is awesome news. Can you imagine a new spending culture emerging in our economy that is not dominated by credit score obsession, 0% balance transfers, and minimum card payments?
Are we approaching a point where consumers will tell FICO to take its score and shove it as well? (I’ve been advocating that for a long time.)
Another potential consequence of this “dump the credit card” trend is that banks will pull out the stops to attract debit card users, which can also make them money. This will likely mean an increase in debit card rewards programs, better protection for debit card purchasers, and more favorable deposit account terms.
In that regard, if you have switched to debit cards for many of your purchases, don’t overlook community banks, many of which offer rewards checking accounts that pay two or three times the interest rates offered by the internet savings banks.
I am not predicting the end of credit cards or the demise of the credit score. Both have a place in our economy. But that place needs to be much smaller than they have occupied for years.
Let’s keep the pressure on, fellow consumers, and put the banks and FICO in their place.