NEW YORK (CNNMoney.com) -- Credit card use is on the decline, as millions of Americans cut up their plastic or get cut off by their credit card companies.
In the past year, more than eight million consumers have stopped using credit cards, according to TransUnion, a Chicago-based credit researcher. That means 78 million U.S. consumers do not have credit cards, compared to 70 million last year.
The company said the decline is partly due to "charge-offs in the higher risk segments" and partly because of "more conservative spending in the low-risk segments."
Gerri Detweiler of Credit.com said it is "unprecedented" for consumers to "abandon" their credit cards. "I've been covering this since 1987 and I don't recall numbers like that ever going down," she said. "They've always gone up."
Detweiler said the recession is a major factor. "When people are confident about their financial situation and the economy, they feel more confident about using credit," she said. "When they're scared or nervous about their own economic situation, or the economy in general, then they're more likely to buckle down and avoid debt altogether."
In other signs that consumers are casting off credit, TransUnion said the average U.S. credit card debt fell more than 11% over the past year to $4,964 in the third quarter. In that same time, delinquencies declined by nearly 25%.
It's not just the consumers, said Ben Woolsey, director of marketing and consumer research for Creditcards.com, but also "the knee jerk reaction of the credit card industry to the recession and the credit card act."
He was referring to the Credit Card Accountability, Responsibility and Disclosure Act, which went into effect earlier this year and put a serious cramp on the industry's ability to raise rates and impose fees. As a result, the industry cut off the consumers that it saw as dead weight.
"The recession really drove high credit card losses over the last couple years and the credit card industry reaction was to choke off new credit," said Woolsey. "They were also closing down dormant accounts and accounts that appeared risky."
These new obstacles to the credit card industry are seen as opportunities for other aspects of the economy, such as prepaid debit cards, which have their own host of problems.
For example, on Monday, the reality-show Kardashian sisters canceled their prepaid Kardashian Kard after Connecticut Attorney General Richard Blumenthal questioned the legality of its "pernicious and predatory fees."
Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit, said this growing distaste for credit cards created "one of the fastest growing consumer segments. Consumers who do not have or use bank-issued, general purpose credit cards still have a need for other payment vehicles, a fact which is beginning to attract significant attention from credit and debit providers alike."
Going forward, however, Credit.com's Detweiler said consumers will eventually turn back to credit.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||4.45%||4.47%|
|15 yr fixed||3.89%||3.90%|
|30 yr refi||4.45%||4.46%|
|15 yr refi||3.88%||3.88%|
Today's featured rates:
US Starbucks stores are bugged by drinks no one wants, too many stores and not enough innovation. More
OPEC members are meeting Friday in Vienna to consider a potential production increase that would please its customers and help ease prices. More
Russian trolls posing as an American college student tweeted about divisive social, political and cultural issues using an account that amassed thousands of followers -- and appeared in dozens of news stories published by major media outlets -- as recently as March. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
Thinking of splashing out a lot of money on fancy new car or dream vacation? Ask yourself these six questions to avoid financial chaos. More