Credit Card Late Payments Hit 17-Year Low

NEW YORK -- Credit card users are so focused on keeping their accounts in good standing that they've driven the rate of late payments down to its lowest level in 17 years.

The national credit card delinquency rate, or rate of payments 90 days or more past due, fell to 0.60 percent in the second quarter, down from 0.92 percent a year ago. That's the lowest rate since 1994, according to credit reporting agency TransUnion.

Delinquencies were expected to drop, but the improvement in that April to June period was faster than forecast.

And the improved payment habits came despite increased use of credit cards, based on quarterly data reported by banks that issue Visa and Mastercard-branded cards and data from American Express Co. and Discover Financial Corp.

TransUnion also saw higher card use, reflected in a slight uptick in the amount of debt card users carried during the quarter. The average combined total debt for all major credit cards increased by $20 from the first three months of the year, to $4,699 per borrower. Even so, that amount is down more than 5 percent from the $4,951 average in the second quarter of 2010, and is 16 percent lower than the peak average debt of $5,575 in the first quarter of 2009.

The overall improvements stem from a variety of factors, said Chet Wiermanski, global chief scientist for TransUnion's financial services business.

"Not only do we have consumers that are using their debt more responsible and taking out less debt, they've also cut back on the number of the cards they carry," he said.

Also contributing is the fact that banks have tightened their standards for approving card applications. After writing off record levels of uncollectible debt in recent years, most banks won't issue cards to applicants with low credit scores. They have also cut back credit limits on existing cards, making it harder for individuals to run up huge balances.

And Wiermanski noted that debit card use continues to rise, which reflects more cautious spending by consumers.

TransUnion expects the delinquency rate to continue drifting down for the rest of this year, but didn't offer a specific projection. "It's hard to forecast where this is going when you've reached a historical low," Wiermanski said. "Because you're in uncharted waters."

Comments

[jeanocelot]

07:57 AM on 08/18/2011

Of course, what is not being said is that a lot of delinquent accounts have been removed via Chapter 7 bankruptcy, which is another way of saying that the accounts will be delinquent forever ...

[StopThePlanet]

03:20 PM on 08/17/2011

The banks will find a new way to exact their pound of flesh instead of late payment fees and raising interest rates.

[pooka47401]

12:15 PM on 08/17/2011

I have been aware of credit cards since Sears first issued theirs, back in the '60's. Bankers were trying to figure out how to make people pay to use their own money. I was forced to get a credit card in the late '80's, because I paid cash for my purchases. I went to a retail store and wrote a check to pay for my purchase. They ran my name through a credit ratings agency and I was told that I had no credit, there for they would not take my check. They would, on the other hand, take my debt card. That I did not have bad credit, did not matter.

The Consumer has been forced, over a period of years, to use credit cards. If you need to rent a car, you must have a credit card. And the list goes on. Yet the Consumer is being blamed for blithely dancing down the garden path that the Banks laid with booby traps of hidden charges and changing interest rates. Did I say that I now only bank with my Credit Union?? This has been a carefully orchestrated plan to rob the consumer, and they are blaming the victims to draw attention away from their deceit.

Meanwhile the Consumer Protection Agency is being fought by the Banks and the Republicans.

[mbo2]

10:25 AM on 08/17/2011

Good.

So now Paul Krugman can shut his trap with all his talk about taxpayer-funded loan forgiveness. Those of us who pay our bills don't need to pay off the bills of those who don't.

[StopThePlanet]

03:22 PM on 08/17/2011

We have been paying off the bills of those who don't.  In the form of higher interest rates and penalties using schemes that cause the good borrowers to subsidize the bad risk of unqualified buyers.  Where have you been?

[innerpuppie]

01:18 AM on 08/17/2011

Great, now banks are gonna whine that their profits are down and they need another bailout☺.

[adv08840]

06:53 PM on 08/16/2011

That is just great. Now the credit card companies will be complaining about not making money because people are paying on time and the banks are not getting their late fees.

[MyNinja]

07:57 PM on 08/16/2011

Shhh, they'll hear you and come up with new ways to get that money back from us.

[smartprov]

06:04 PM on 08/16/2011

Credit card late payments are also the result of people not using the stupid things at all. The credit card interest rates are at an all time high, yet deposit accounts at some of the same banks that issue the cards only have an APY of 0.01%. Now most of the consumers that utilize debit cards are on the chopping block thanks to the Durbin Amendment. Just wait, the banks are finding other ways to make revenue. Most banks already "repriced" their deposit products and slashed free checking. Thanks to the Durbin Amendment, most of us will be paying fees for use of a debit card. We the consumers will pay for lost revenue from late fees in a different form. Do some research and bank with a credit union. Not all credit unions are the same. Open up a secured credit card for car rentals, hotel reservations, and gasoline. That way, you build credit history and not tempted to overspend and make impulsive purchases. The banking industry has changed drastically. Just an opinion and suggestion.

[tallbussys]

05:21 PM on 08/16/2011

This might be because Credit Card companies raised thier interest rates to userous levels on consumers and raised the percentage merchants have to pay to accept credit cards. Most merchants would love to be able to give discounts for cash payments but if they do MasterCard, Visa and American Express would no longer let that merchant accept thier card.

[Felix Branson]

05:17 PM on 08/16/2011

I think the big story out of TransUnion's and Experian's latest studies is that Americans are now making their credit card payments on time at a much higher rate than they did in 2007, while exactly the inverse is true for mortgage payments, with 25 percent more consumers paying their mortgage 60 days late than did in 2007. http://blog.unibulmerchantservices.com/americans-continue-paying-down-credit-cards-before-mortgages

[djones7834]

07:38 PM on 08/16/2011

I was going to type the same thing Felix. You saved me the trouble.

[Manchuscout]

04:58 PM on 08/16/2011

Save for dire emergencies, credit cards should never, ever, be used again. The banksters that issue them have the vast majority of Americans locked in a death spiral of increasing debt. One of the main reasons why our economy is in such bad shape is that consumers have so little to spend; they're sinking almost all of their disposable income into fighting off these malevolent parasites! Think on it. You lend Bank of America your money through deposits you make in your savings account. They invest it offshore and pay you less than 1% interest. You borrow from Bank of America and they demand you pay, at the very least, 15%. Why are we paying these gangsters anything at all, and why aren't we going after the bribe-ridden low-lifes in Congress who empowered them? What I wouldn't give to see these three-piece-suits working in the same chain gangs as every other thief and robber!

[tallbussys]

05:23 PM on 08/16/2011

Bank of America is a prime example of what is wrong with the US banking system.

[Dan Schell]

03:55 PM on 08/16/2011

More eye-straining legal fine print is probably on the way from your credit card company, changing terms to get their profits up.

[Dan Schell]

03:49 PM on 08/16/2011

This shows consumers are paying on their debts of previous years. Why can't the government?

[chichel]

03:43 PM on 08/16/2011

I've got nooooooo credit cards now. It was hard at first, but it keeps you in check. If you don't have a CC you can't spend what you don't have.

[artgrrl74]

05:08 PM on 08/16/2011

same here. haven't used them in 15 years and aren't planning to anytime soon.

[Sherry Breeden]

03:37 PM on 08/16/2011

Maybe there are less late payments because there are less people using credit cards.

[nickpasq]

03:42 PM on 08/16/2011

Whatever the reason if would be good if Obama followed their lead.

[tallbussys]

05:25 PM on 08/16/2011

I always thought Congress held the purse strings........Not the President....

[dannydmc]

03:34 PM on 08/16/2011

I cut up my CC's three years ago and am paying the balances down and will never own another one again. These CC companies are in bed with the govt to milk the citizens for as much money as possible and grow the banking industry. Bailouts and regulations are killing individual citizens and making the banks richer.

[camandkel02]

03:52 PM on 08/16/2011

you know you are a complete idiot. the cc company is milking no one that did not stick thier tit in the milker.

[artgrrl74]

05:10 PM on 08/16/2011

you can turn that idiot comment back at yourself if you cannot see that CC companies do everything in their powers to strategically rape your pocket. are you being paid to defend their image?

[dannydmc]

06:58 PM on 08/16/2011

No, YOU are the complete idiot. People are sticking their tit in the milker at 9% and doing whats required of them, but because of something else they did "after the fact" to someone totally not related, CC companies are raising interest rates into the low 30% range when the original term of the company was 9%.

People might forget to pay their electric bill and it causes a balance on their CC to now be charged triple the interest rate even though they paid IT on time.

Thanks for being a complete moron and not even making a valid argument. Epic FAIL on another idiot HP poster

[harry512]

05:21 PM on 08/16/2011

A tremendous number of people are going to the quick loan and check cashing companies that charge a lot higher interest rates than the banks did. Nobody complains about them. The bank's rates are not bad until you default. Then the game changes. All of us are seeing significant changes in our credit card statements because of reducing penalties on the people that don't pay. I guess that is another way to spread the wealth.