CHICAGO - Only 18 months ago, Wade Thomas had credit card debt of $16,480 on his 20 credit, retail and gas cards.

But when the Austin, Texas, travel planner lost his job in July 2009 at a company for which he had worked for 11 years, he decided to use some of his severance package to reduce his debt.

Today, Thomas' combined credit card balance stands at $2,550.

"I only charge what I'm able to pay off in a sensible duration," typically a month or two, said Thomas, 32, who found work in April. He uses his Discover card most often because it offers a percentage of cash back on purchases.

Credit card debt per borrower is falling, according to credit reporting firm TransUnion. But consumers' resolve will continue to be tested. That's because Discover, Target, Chase and others are dialing up their card rewards programs, introducing new products or boosting marketing to get consumers to use plastic more often.

Riverwoods, Ill-based Discover Financial Services last month said its third-quarter marketing expense will likely be at its highest level since the third quarter of 2008.

"The biggest opportunity is from our current card member base, because we've got about a quarter of U.S. households who have a Discover card, and we don't have a quarter of the market in spending and loans," CEO David Nelms said last month.

On July 1, Chase's "Ultimate Rewards" program launched a national ad campaign touting the benefits of its credit and debit cards.

And last month, Target Corp. announced that this fall shoppers will receive a 5 percent discount each day they use the retailer's Redcards, including the Target credit card and Target check card. The Target credit card currently carries an annual interest rate of 25.2 percent.

But don't expect Rodger Malcolm Mitchell, of Wilmette, Ill., to apply for one. The retired business owner and economist said he never carries a balance on his MasterCard, a United Airlines Mileage Plus Visa or Costco-branded American Express, which offers discounts everywhere.

Mitchell, 75, prefers membership cards over retail-branded credit cards.

"Membership cards do essentially the same thing with less hassle," said Mitchell, who has such discount cards from grocers Jewel and Dominick's and restaurant group Lettuce Entertain You. "With a membership card, the consumer has no need to take on yet another credit card, which many consumers are reluctant to do."

Because he's unlikely to apply for retail cards, he avoids shopping at those stores because he knows he's not getting the special discounts that their card members get.

Still, some consumers find themselves using credit cards out of necessity.

"I'm using them a lot more," said Gabi Gregg, 23, a Chicago blogger whose MasterCard and Visa have a combined balance of about $5,000. Since graduating in May 2008 from the international relations program at Massachusetts' Mount Holyoke College, Gregg has had odd jobs but hasn't found steady employment.

"So when I don't have the cash, I rely on credit cards, and that way I don't have to pay it all at once, even though I know it's not the smartest thing to do," said the author of the "Young Fat & Fabulous" blog.

Gregg is one of 20 finalists nationally for the MTV and AmEx Zync card's "Follow Me: The Search for the First MTV TJ," or Twitter jockey. The winner gets a one-year contract with MTV that pays $100,000.

"That would help me pay down my debt," Gregg said.

On Twitter, where her handle is Gabifresh, she suggested that if her 4,400 followers each sent her $1, she'd be well on her way to paying off her credit card debt. Her mother also helps with payments occasionally.

The American Express and MasterCard of David and Laura Eikenmeyer also are getting swiped more often these days as the couple prepares for the September opening of their Urban Child Academy in Chicago.

David Eikenmeyer declined to divulge their credit card balances, only to say they're up over a year ago because "it's an expensive project."

The $1.5 million venture, which includes extensive renovations to a three-story building, is also being financed with bank loans from Chase and ING as well as savings.

David Eikenmeyer is a lawyer with a master's in business administration, and Laura Eikenmeyer has a doctorate from Loyola in educational psychology.

"This is a long-running dream of hers," David Eikenmeyer said of Laura Eikenmeyer wanting to open the preschool that will accommodate up to 45 children ages 15 months to 5 years. "I don't know if it's ever a safe time to start any business, but I know there's a big need for child care in the area."

Ian Halpin, a real estate broker with Jameson Real Estate in Chicago, said he has cut back on using his credit cards to reduce his debt.

He has two credit cards, Citibusiness and Bank of America, and one store card, World Market, which he occasionally uses to buy staging materials and furniture for his real estate listings. Halpin expects to have the remaining $1,100 balance on his Bank of America card - it was about $2,500 at the start of the year - paid off within four months.

"I'm just not going to pay high rates when I have the cash in the bank to pay for purchases," Halpin, 40, said.

His Bank of America card carries an interest rate of more than 25 percent, Halpin said. He got his Citi rate lowered to 5 percent, but says it'll rise again if he makes purchases.

The average interest rate assessed on bank credit cards in the first quarter was 14.67 percent.

Consumers have cut their levels of outstanding revolving debt, which consists overwhelmingly of credit cards, by an annualized, seasonally adjusted rate of 10.5 percent in May, the Federal Reserve reported Thursday. Revolving credit is a line of credit allowing consumers to pay all or part of an outstanding balance, and, as the balance is paid, it becomes available to spend again as credit.

But it's not known how much debt banks or merchants will charge off, or basically remove from their books because they've deemed it uncollectable. The first quarter's 10.1 percent charge-off rate, for example, matched the highest level over the last 25 years.

In the first quarter, about 40 percent of the decline in credit card debt was due to charge-offs, Cardhub.com said. And though consumers did pay down $36 billion in credit card debt in the first quarter, that's still 23 percent less than they repaid a year earlier, it said.

Some debt vanishes in other ways. Consumer bankruptcy filings nationwide are up 14 percent over the same period a year ago, according to the American Bankruptcy Institute. The bankruptcy process cancels many debts.

Also, lenders have been stingier about the levels of credit they grant, giving consumers less rope to get in over their heads. New credit card limits from banks are 40 percent of what they were in 2006, Equifax, which has credit files on nearly 200 million U.S. consumers, said last month.

All those factors suggest there is less credit in the system, Equifax and others say.

But some expect that to change with lenders loosening up more credit because delinquency rates have been falling.

"They believe that losses have peaked, and, therefore, moving forward the credit losses you can expect from new consumers would be less than what they've seen so far," said Odysseas Papadimitriou, a former Capital One executive who is CEO of credit card research Web site Cardhub.com.

"If you're seeing delinquency rates going up, you never know when it's going to end, but seeing it go down you can feel more confident that the worst is behind us."

(c) 2010, Chicago Tribune.

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