U.S. credit card debt has dropped sharply around the country as consumers make a greater effort to spend cautiously and pay off balances, according to a new report from Equifax. In fact, the credit reporting agency found that the biggest declines were seen in areas hardest hit by the recession.
Credit Card Debt Falls by Double Digits
The Equifax report issued on Tuesday revealed that nearly 60 of the top 100 metropolitan areas (MSAs) that were hardest hit by credit card debt as a result of the recession experienced double-digit declines in the percentage of income owed to credit card companies.
The MSAs said to experience the most sizable reductions between Q4 2010 and Q4 2011 are clustered in four states across the country:
- Florida: Port St. Lucie (23.59 percent), Ocala (20.97 percent), Northport-Bradenton-Sarasota (18.44 percent), Tampa-St. Petersburg-Clearwater (18.43 percent), Lakeland-Winter Haven (18.32 percent)
- Louisiana: Shreveport-Bossier City (20.10 percent),
- Washington: Bremerton-Silverdale (20.62 percent),
- California: Bakersfield-Delano (19.05 percent), Salinas (17.85 percent)
According to Equifax, all of the cities that experienced the greatest declines in debt were also among the cities that were hardest hit by the recession. But the drop wasn’t isolated to those cities or just credit card debt. The total consumer debt (mortgage, auto, credit card, etc.) has declined a substantial 11 percent from its peak of $12.4 trillion in Oct. 2008.
Debt Decline Attributed to Cautious Spending
Areas most negatively impacted by the recession are showing the greatest decrease in debt because, in part, consumers are taking greater precautions when it comes to money management. According to Equifax, consumers in the hardest hit areas are not only spending more cautiously, but they’re also working more diligently to pay down their debt.
Another reason for the decline in average credit card debt could be tightening bank standards and an inability for some consumers with lower credit scores to acquire loans and cards from financial institutions.
Equifax said that credit card debt has been on a steady decline, starting in the fourth quarter of 2010 and continuing through the end of 2011. But as found in a recent report from First Data, credit card use has already returned to pre-recession levels meaning that debt in 2012 is likely to increase as well.