Consumers ditching their credit cards and paying down debts
CONSUMERS are ditching their credit cards in record numbers and signing up for debit cards instead.
For the first time there are now twice as many debit cards as credit cards, as our love affair with the plastic credit card goes into meltdown.
With a debit card you can only spend money with it if you have funds in your bank account. This is in contrast to credit cards where you can spend money you do not have.
There are now twice as many debit cards as credit cards, the Irish Payments Services Organisation (IPOS) said yesterday.
This is partly because consumers have been cutting up their credit cards -- the number of personal credit cards in issue has dropped by 100,000 in the past year, separate Central Bank figures show.
And consumers are also paying down credit card debt, with €200m paid off credit cards in the past year alone.
Collectively, consumers owe €2.7bn on some two million credit cards. At the end of 2008 consumers' card debt was as high as €3bn.
Una Dillon of IPOS said that the fact that there are now more debit cards out there than credit cards was a reverse of the situation that existed just two years ago.
"The trend is for people to pay off their credit card debt, stop using it and use their debit card more and more," she said.
Ms Dillon said there were now 1.2 million more debit cards than credit cards. This was because over the last five years around 10 times more debit cards than credit cards had been issued.
Part of the appeal of debit cards is the fact that they lessen consumers' dependence on cash. Most of the 100,000 retailers who have card swipe machines offer cash back when people are paying for something.
Most banks in this market are in the process of dropping the Laser card which is particular to Ireland. Ulster Bank and Permanent TSB have gone over to the Visa debit card, with Bank of Ireland in the process of transferring to the same card.
AIB still operates the Laser card, but the EBS which is being merged with AIB, recently said it was moving to the Mastercard debit card platform.
Meanwhile, the Central Bank has proposed new rules that would stop card providers hassling customers who owe them money.
The new rules will propose that card companies will not be able to make more than three uninvited contacts with a card holder a month. A similar rule is in place stopping mortgage lenders harassing those in arrears.
Credit card companies have been repeatedly accused of hassling customers with constant phone calls when they fail to make minimum payments.
The Central Bank is proposing to make the rule change by beefing up the Consumer Protection Code, which is a rule book on how banks and insurance companies treat consumers.
The rules restricting lenders to three unsolicited contacts a month will apply to borrowers struggling with credit card and other unsecured debts such as personal loans.