Recent reports reflect that consumers are using credit cards more responsibly.
In a report released by the American Bankers Association, it shows that credit card customers have become less delinquent on their credit card payments. Correspondingly, this has decreased the amount of charges incurred by the credit card customer when not paying their card statements on time. This level of fewer reported delinquencies has dropped significantly in comparison to a level high in 2001.
A credit card account is considered delinquent when the customer has not paid on the account in over 30 days.
The current level of delinquent accounts is at 2.93%. This level of delinquent accounts is down from the first quarter level which reflected a 3.08% delinquency rate. In addition, the overall average, over the course of 15 years, shows those accounts in delinquency averaged out to be 3.91%.
It appears at this time that U.S. consumers, for a variety of reasons including the recession, are spending less and saving more of their hard-earned money. To paraphrase James Chessen, a head economist with the American Bankers Association, it appears that financial uncertainty has given the American consumer pause and created a commitment to work towards improving their financial foundation and not take on new debt.
Underscoring this recent consumer trend is a report generated by the Federal Reserve Bank located in New York. In this report, not only does the bank confirm that delinquencies of credit card payments have decreased, but the corresponding inquiries into a person’s credit history have also fallen. This fall in credit card inquiries has deceased in two consecutive quarters. A person’s credit history is accessed when the potential customer enquires about opening up a new credit account. In this report, it is also reflects that outstanding credit card balances per consumer has declined by 22%. This is a significant decline since it reached its maximum peak in 2008.
However, as the credit card delinquency rate and balances have fallen there seems to be a rise in delinquencies in other credit accounts. Specifically credit accounts such as loans associated with home equity or home improvement, recreational vehicle loans and auto loans are on the rise with the delinquencies. These statistics are reported by the American Bankers Association.
Consequently, although there seems to be less of a delinquency rate in one area where credit balances are maintained, there seems to be an increase in late payments in other ways that credit can be extended for consumers. This credit situation does not bode well for the American economy and indicates that the consumer has simply kept up on credit card payments, but is now deferring payments on other credit accounts or loans.
