NEW YORK (AP) -- The amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.
The average combined debt for bank-issued credit cards -- like those with a MasterCard or Visa logo -- fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.
The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.
Credit card debt remained the highest in Alaska, but slid 7 percent there to $7,148. A total of 22 states recorded debt higher than the national average.
Residents of Alabama paid off the most debt, dropping their average balance by 27 percent to $4,753.
More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.
That's the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit. The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.
That concern reflects several economic factors, from the fear of unemployment to the fact that the collapsed housing market means it's harder to cash in on home equity when money gets tight. "You can't buy groceries with your house anymore," Becker said.
Reflecting the weak economies in the states hardest hit by the housing crisis, the delinquency rate was highest in Nevada, at 1.5 percent of cardholders, followed by Florida, 1.24 percent, Arizona, 1.11 percent and California, 1.08 percent. In all, 16 states fared worse than the national average for delinquencies.
The lowest delinquency rates remained in North Dakota, at 0.54 percent, and South Dakota, at 0.55 percent.
In a twist, Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don't make mortgage payments, he suggested, they have a short-term cash boost.
"That can provide extra money to pay down credit cards," he said.
Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.
TransUnion predicts that the national delinquency rate will remain below 1 percent for the rest of the year. However, on the high end, the Nevada rate is forecast to edge up to 1.6 percent.
http://finance.yahoo.com/news/Credit...&asset=&ccode=
Banks are becoming a lot quicker about writing off things. That has also kept the delinquency rate down, by simply removing accounts that are delinquent from that statistic.
Of course, with the reduction in high interest debt income, the banks will have to make that up somewhere to keep their stockholders happy.
Long term I see this as good news.
^^^ Definitely agree.
the bad news is that homes are still going into foreclosure.
Seems to me that I read that if you have to choose, it's better for your credit score to let your mortgage go into default and instead pay off your loans/credit cards.
All this means is that the cc/bank corps will be/are arbitrarily raising the interest rates and penalties and fees and hidden gotchas (like a penalty for paying your cc on time), with no corresponding increase in the qty or quality of their "product".
Same is happening with BigPharma. The prices are up 8%, same product, and they spend twice as much on marketing $60B as they do on research $30B, because they claim generics are eating into their profits.
The corps you because they can, and there's no defense, esp if you think you think you need a product like drugs, or a checking account.
I wonder how many people broke into CDs or other investments in order to get out of some debt...
having a CD that is paying 1% to 2%, and having a large balance on a CC that is charging you 15 to 20% interest...
I had to and I know of several other people around here that did as well.
It's getting really hard to make do in these parts.
Well not really...
Its good news for the consumers who live in Non Recourse states…These numbers merely reflect the strategic default strategies now being taught in our Universities…Under this administration, underwater homeowners can live rent free for 1 to 3 years…They then pay off their credit cards, auto loans, pad their bank accounts, in the end tax payers pick up the tab…
Change you can believe in I guess…
"broke into CDs or other investments in order to get out of some debt"
I've seen several articles discussing a greatly increased number people withdrawing from their 401's and other pensio schemes under the "hardship" clause.
son i didn't learn like that in my U, i just stayed off the grid till the SOL ran outWell not really...
Its good news for the consumers who live in Non Recourse states…These numbers merely reflect the strategic default strategies now being taught in our Universities…Under this administration, underwater homeowners can live rent free for 1 to 3 years…They then pay off their credit cards, auto loans, pad their bank accounts, in the end tax payers pick up the tab…
Change you can believe in I guess…
Individuals are simply doing what the government should: tightening their belts because they are uncertain of things to come.
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