Consumers paying down credit cards, study says

Consumers have reversed their payment priorities over the past five years and are spending more paying down credit cards than purchasing, a switch in behavior from 2004 to 2009, according to a new study.

The Chicago-based TransUnion conducted a study that showed that in 2009 and 2010, consumers spent $72 billion more paying down their credit cards than actually making purchases, the Chicago Tribune reports.

"Our analysis shows that consumers have made a concerted effort to pay down their credit cards during these uncertain economic times," Ezra Becker, the vice president of research and consulting in TransUnion's financial services unit, said, the Chicago Tribune reports.

From 2004 to 2009, consumers showed a $75 billion turnaround in payment priorities, at $2.1 billion more in purchases than payments.

"This reversal is even more profound when you consider that alternative forms of revolving credit, e.g. home equity lines of credit, were far more accessible in 2004 than in 2009," Becker said, the Chicago Tribune reports. "So while charge-offs have played a major role in lower credit card debt levels, it was not the only factor. Consumers were also paying down their debt across the risk spectrum."

Average credit card debt in the United States continues to decline. In the first quarter of 2011, it was at a 10 year low of $4,679.

Most consumers, however, do use debit cards on the majority of their purchases.

"All things being equal, we believe that consumers, especially younger adults, will continue to have an increasing preference to use their debit cards over credit cards," Steve Chaouki, the group vice president in TransUnion's financial services, said, the Chicago Tribune reports. "Regulatory and legislative proposals either currently under discussion or recently enacted will impact the industry significantly and could alter this payment preference trend."

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