Credit Card Cancellation Rates Down

According to “Cardbeat”, a syndicated market research report published by ACG, credit card cancellation rates are dropping, likely because of tightening credit standards and recent mortgage woes.

In 2006, Cardbeat data indicated that 15% of consumers said they had cancelled a credit card within the past year, compared to data that predicts only 11% of consumers will cancel a card within the next year.

The company said recent economic changes, rising interest rates, and the ongoing mortgage crisis may be having a negative affect on consumers, leading to a higher cancellation rate.

Over the past few months, credit card issuers have been lowering available credit limits and raising interest rates, while also increasing fees for late payments and balance transfers.

It’s unclear if consumers are more concerned with the terms on their current credit card, or the fact that they may need the credit card as a backup if the financial crisis spills further into the consumer fray.

In recent months, homeowners have turned to their credit cards to make mortgage payments, a clear sign that consumers are relying more upon credit, and that the worst is yet to come.

Cardbeat noted that the main reason consumers cancel their credit cards is because the cards go unused, with about 20% of canceled cards never in fact activated.

It’d be interesting to know if heightened awareness regarding the fact that canceling a credit card can lower credit scores had any effect.

The data was generated from a survey of 401 credit card users in May 2007.

Related Topics:

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2. Capital One to Lift Credit Card Interest Rates
3. Credit Card Lates Surge as Mortgage Crisis Rolls On
4. Credit Card Interest Rates May be Capped at 16 Percent
5. Credit Card Direct Mail Continues Decline