Credit Card Debt Drops with Tightened Bank Standards in 2011

Posted by Brittany Kelly On January - 20 - 2012 0 Comment

Consumers were able to reduce their credit card debt by a significant number in 2011, according to a new report. While many consumers adjusted their spending to lower their debt, some found their credit limits had been slashed by their banks or their credit scores were too low to acquire cards at all.

Average Credit Card Debt Falls 11 Percent

The average credit card debt for consumers last year dropped by a whopping 11 percent. Cardholders were said to carry an average balance of $6,576, which is a considerable drop from $7,404 the previous year.

The report examined data from a population of more than 300,000 consumers and revealed that the average debt loads cardholders carried dropped in every state.

While the drops in debt were substantial last year, the report noted that this was not the first year consumers had reduced their use of credit cards. In 2010, credit card debt fell by 7 percent during the year.

Tightened Banking Standards Impact Credit Card Debt

The decline in credit card debt is largely attributed to weak consumer confidence and an increased interest in spending only money that had been previously earned.

Banks also tightened their lending standards and slashed credit limits, which impacted consumers’ credit card debt. In the years following the financial crisis, banks have refrained from offering loans or credit cards to consumers with subprime credit scores, so many customers reverted to debit cards and cash to make purchases.

Experts now believe that this trend may soon slow or come to a halt as the economy continues to rebound and banks loosen their credit standards. A recent report from First Data has already found that credit card use has returned to pre-recession levels.

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