Last year's credit card legislation definitely accomplished one thing: it helped to discourage people from using their credit cards. We already know that revolving consumer debt has declined $145 billion or 15%, since it peaked in August 2008, before the credit crisis hit. Now, however, a study by Javelin Strategy and Research shows a dramatic decline in credit card usage as well.

Although the report isn't available to the public, it includes some statistics that suggest credit card usage is way down. It says that as of November 2009, 56% of consumers used a credit card in the last 30 days. That's a huge decline from 87% and 64%, in 2007 and 2008, respectively. Javelin estimates that if the current trend continues, then usage will drop to 45% in 2010.

Considering how much revolving debt has declined over this time period, these numbers make sense. Although total debt had only declined by 10% through November, in order to make that happen, credit card usage must have been down even more. Even if usage goes to zero, a balance might only decline by little each month if borrowers are making minimum payments. This new data tells us that people are cutting their cards usage significantly as part of their strategy to pay down their debt.

Some of this decline in credit card usage is simply due to the weak economy. If people are spending less, then they're using credit cards less. They're also trying to pay down their debt. But these factors can't be the whole story: spending and balances haven't declined nearly as dramatically since 2007 as card usage. It's likely the credit card legislation also had something to do with it.

When the new rules were put in place to protect consumers during the spring of 2009, credit card companies had a predictable response: they raised interest rates across-the-board. Facing higher rates, suddenly people aren't as eager to use their credit cards. Unless they're true convenience users who don't run a balance, using a credit card got more expensive over the past year.

Instead consumers are relying on other means of payment like cash, debit cards, and pre-paid cards. The report also notes that while Visa's credit card purchase volume declined by 7.3% from 2008 to 2009, the company's debit and prepaid card purchase volume increased by 7.9%. Other card types had similar changes.

Is what we're seeing here a trend that will continue indefinitely? It's a little hard to say now, considering how much has changed for credit due to the economy and recent legislation. If consumers really are planning on living a more fiscally responsible lifestyle, and decide not to run up as high credit card balances going forward, then the trend will eventually hit a sweet spot. At that time, convenience users will be responsible for a larger portion of credit card activity. But if Americans go back to their old ways, then credit card usage will rise again.

(h/t: Jennifer Saranow Schultz, New York Times Bucks blog)

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