How the pandemic has accelerated the demise of credit cards, in 4 charts - Tearsheet (2024)

FAQs

Why are credit cards dying? ›

U.S. consumers are slashing their credit card use, particularly Millennials and Gen Z. The declining popularity of credit cards among young shoppers could be an early sign of a permanent shift in consumer preferences.

Key Takeaways. Credit cards make it all too easy to overspend. Buying on credit can also make your purchases more expensive, considering the interest you may pay on them. Getting into too much debt can not only hurt your credit score but also strain relationships with family and friends.

If the balance on your bank account is too low, or you get close to or go over your credit card's credit limit, your card may be declined.

The minimum payment mindset

Here's how most people get trapped in credit card debt: You use your card for a purchase you can't afford or want to defer payment, and then you make only the minimum payment that month. Soon, you are in the habit of using your card to purchase things beyond your budget.

In fact, during the pandemic, the share of cardholders who paid off their credit card debt reached the highest in recent years. Specifically, the share of all active accounts that carried a balance declined from 50% to 45% from April 2020 to December 2021.

Credit card transaction volume softened due to the pandemic in 2020, decreasing by five per cent from 2019. It quickly rebounded and surpassed the pre-pandemic level in 2021 and continued to grow in 2022.

“Since credit card accounts are usually profitable, those accounts are almost always sold. In the unlikely event no one buys the credit card portfolio of a failed bank, the custodian will notify the cardholders that their accounts will be closed and to transfer their holdings, usually within 30 days.”

Keeping an unused credit card open can help keep your credit score higher.

Call and write your bank or credit union

Tell your bank that you have “revoked authorization” for the company to take automatic payments from your account. You can use this sample letter . Some banks and credit unions may offer you an online form.

43 / Stolen card, pick up: The card's owner has reported it as stolen, and the bank is preventing the transaction from going through. Decline service to the person who is attempting the transaction and request an updated payment method from your customer if this is a recurring payment.

Can you withdraw money if your card is blocked? ›

So if your card is blocked for any suspicious reason while you're on the road, the first thing you should do is scope out an ATM nearby. Then, when you speak to your bank to arrange for the new card, you can also arrange to withdraw some emergency cash.

Credit cards sometimes trigger transaction fees.

That makes it more expensive to use a credit card to pay rent, taxes, school tuition, insurance, and utilities. It might be cheaper to pay these with cash or debit.

Paying only the minimum is a debt trap because it can take years to repay a sizable balance that continually accrues interest. Tip: If you can't pay your monthly balance in full, pay as much as you can above the minimum.

Are credit cards going away in five years in favor of new payment technologies or new ways to transfer funds? Not likely.

The days of shuffling through your credit cards could be at an end. You'll soon be able to store your payment methods -- credit cards, debit cards, bank accounts -- all in one place, potentially rendering physical cards and even credit card numbers obsolete, according to credit card giant Visa.

To fight inflation, the Federal Reserve hiked its benchmark interest rate a total of 11 times between March 2022 and July 2023, raising it from around zero to a range of 5.25% and 5.5%. That rate influences a host of other borrowing costs, including those for credit cards, car loans and mortgages.

Conclusion. While it's unlikely that credit cards will disappear entirely in the near future, the form and function of credit transactions are likely to evolve significantly.