There are several provisions of the 2009 Credit Card Act that are intended to help consumers. Whether these provisions are changing consumers behavior is another matter.

The Credit Card Act of 2009 took effect on February 22, 2010; since then you might have noticed some changes on your credit card statement: 

  • How much interest you'll be paying on your balance
  • How long it will take to pay off the balance if you only make minimum payments
  • A phone number to a credit counseling agency

Consumer Behavior Is Changing

Credit card companies have noticed a few trends in behavior: 

  • Revolving credit balances have been dropping since late 2008
  • A steady decline in the rate at which banks write off past due balances (the charge-off rate)
  • A decline in late payments

What Is The Real Cause?

Since the charge-off rate is declining it might be due to the fact that it was high when we first went into recession; perhaps it has declined because now there's not as many accounts to be in default.

It could be that consumers are now cognizant of the amount of interest they're paying. The Rule of 72 would indicate if you're paying 18% interest on your credit card balance, that balance would double in as little as four years (72 / 18 = 4) without making any new charges.

It's very sobering to find out that it would take longer to pay off a credit card with a $10,000 balance than a mortgage if you pay only the minumum.

What is happening is that people are realizing by making more than the minimum payment, they will be saving tons of money in the form of interest charges.

So, it's probably a combination of the fact that many accounts were already written off due to the recession, so the default rate is declining, along with the realization that once people realize how much interest they're really paying, it is taking a bite out of their discretionary spending.

...And Then, Some Unintended Behaviors

Many consumers think that having their home foreclosed is a foregone conclusion so they've simply stopped making the morgage payment and put that money toward their credit cards. This is a bad idea; if your home is forecloed, it's hard to rent an apartment because your credit score will be damaged after the foreclosure and apartment managers check your credit report before leasing to you.

Additionally, the National Foundation for Credit Counseling states that of the estimated 500 million credit card statements with the credit couselor phone number printed on them, only about 150,000 people have used the free service.

If you don't pay your credit card balance in full, does the amount of interest you'll be paying on your credit card have a strong effect on how much you send them?