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New Debt Statistics Show Consumers Have Improved On Debt Management

[Nov 27, 2009.]


New Statistics On Credit Card Delinquencies

Late payments on credit cards decreased 6 percent between second quarter 2009 and third quarter 2009. This is the first time in ten years that credit card delinquencies have fallen between the second quarter and the third quarter of a year. Historically delinquencies go up between those quarters. Combine this with the 11 percent improvement between the first quarter 2009 and the second quarter 2009 and the evidence looks compelling. Many analysts read this as proof that the consumer intends to reduce debt and is starting to make better choices with regards to their personal finances.

Charge-Offs Are Down At Most Large Banks

Delinquency statistics deal with credit card late payments. Charge-offs are when the borrower has stop making payments all together. After several months the bank will declare the debt noncollectable. Bank of America said in a regulatory filing that its charge-off rate was down from 14.25 percent in September to 13.22 percent in October. JP Morgan's charge-offs went down from 8.12 percent to 8.02 percent. Capital One's fell from 9.77 percent to 9.04 percent. Discover Financial Services said theirs declined from 8.69 percent to 8.54 percent. Charge-offs ruin your credit score and should not be a means to debt relief.

Possible Reasons For The Improvement

There is no way to know exactly why the public changes its behavior, but experts agree that the following events may have had significant influence.

  • Banks have been reducing credit card limits. The consumer may fear that bank will revoke their credit card if they make their payments late.
  • Fees for late payments have gone up and may be working to deter late payments better than in the past.
  • The average balance on credit cards is down slightly from $5,710 third quarter 2008 to $5,612 third quarter 2009. This may mean that people are starting to rely less on credit cards and more on cash.
  • Savings rates have declined recently which could indicate that people are using savings to reduce debt. The savings rate hit a high of 6.9 percent in May and has steadily fallen to 3.3 percent as of September. Economists credit the increase in personal savings, in part, due to stimulus checks.

Credit Card Debt Relief

Free debt consolidation programs are available and may be part of why consumers are doing better in the area of personal finance. For those suffering a hardship, such as unemployment, debt settlement programs are another possibility. Whether credit card debt relief is achieved through a debt consolidation program or through a debt settlement program, consumers are finding their way to healthier finances.


About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.

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