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The current credit crisis and economic slowdown coupled with pending federal rules that will limit how credit card issuers can change interest rates on existing balances are making issuers more careful about lending and consumers more careful about borrowing. Just how cautious consumers remain about credit card use and issuers about card issuance after the economy returns to health, and for how long, depends a lot the depth and length of the economic downturn, analysts tell CardLine sister publication Cards&Payments. "The longer it is, the more likely it is to create lasting behavioral changes and changes in the way issuers serve consumers," says Ken Paterson, vice president of research operations and director of the credit advisory service at Mercator Advisory Group Inc. in Maynard, Mass. Paterson points to recent quarterly statistics from Visa Inc. (CardLine, 2/5) and MasterCard Worldwide (CardLine, 2/4) that show spending on credit cards flattening and debit card use expanding. Gareth Lodge, an analyst who covers European payments as regional research director for TowerGroup, an independent research firm owned by MasterCard Advisors, expects a continued flattening or contraction of credit card issuance and use for the long term as card issuers and consumers, even in the debt-prolific United States, come to consider credit as more of a privilege and less of a utility. "There's going to be a change," Lodge says. "We will start to see credit as not necessarily a bad thing but [we] will be wary." Greater use of debit cards will fill the void left by credit, he adds. "In Europe, [debit] already is the key way of managing your money," Lodge says. "The U.S. will catch up with the rest of the world."
