U.S. Credit Card Debt Rises - and So Does Delinquency

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Credit Card Debt Late Payments By ALEX VEIGA

LOS ANGELES -- Americans cranked up their use of credit cards in the third quarter, racking up more debt than a year ago, while also being less diligent about making payments on time, an analysis of consumer-credit data shows.

The average credit card debt per borrower in the U.S. grew 4.9 percent in the July-to-September period from a year earlier to $4,996, credit reporting agency TransUnion said Monday.

At the same time, the rate of credit card payments at least 90 days overdue hit 0.75 percent, up from 0.71 percent in the third quarter of last year, the firm said.

While higher, the late payment rate is rising from historically low levels. The lowest late payment rate on TransUnion records going back to the mid-1990s was 0.56 percent, set in the third quarter of 1994. More recently, it was at 0.60 percent in the second quarter of last year.

During the last recession, many Americans reined in spending in favor of paying off debt, particularly credit card balances. The housing downturn also prompted many homeowners to make paying their credit card accounts on time a priority at the expense of other financial obligations, such as their mortgage payments.

And there are no indications that trend has changed, even with the slight uptick in the late payment rate, said Ezra Becker, vice president at TransUnion's financial services business unit.

"We definitely see consumers being more conservative in their spending and making every effort to pay down the balances and maintain the health of those card relationships," he said.

Americans are also carrying higher card balances, though the third-quarter increase could be due to seasonal factors.

Cardholders tend to use their cards during the holidays at the end of the year and then pay down their balances in the spring. Similarly, many consumers will spend more in the summer and early fall on summer vacations and back-to-school shopping, Becker noted.

The pickup in credit card use also may reflect improved confidence in the economy on the part of consumers.

Consumer confidence increased steadily between July and September, as hiring improved, particularly in August and September. Employers added 171,000 jobs in October.

Another likely contributor to the rise in card balances is that banks have been issuing more cards to borrowers, including those with less-than-sterling credit.

Data on the number of new credit card accounts opened by consumers lags by a quarter, so the most recent figures that TransUnion reports are from the second quarter of this year.

The data show that the number of new cards issued by banks rose 3.1 percent in the second quarter from a year earlier, with more than a quarter of the cards going to consumers with a nonprime credit score, according to the VantageScore credit scale.

A nonprime score is anything below a 700 on the scale, which ranges from 990 to 501. The lower the score, the more of a credit risk a borrower represents to banks.

All told, 29.6 percent of the cards issued by lenders in the third quarter went to nonprime borrowers.

"Lenders are absolutely issuing more credit in the nonprime space," Becker said. "The size of the pie is bigger and nonprime consumers are getting a larger share of that pie."

Banks have become more open to issuing credit cards to higher-risk borrowers due to tight competition for top-rated consumers, many of whom are not signing up for additional credit. That leaves the crop of borrowers with some blemishes in their credit history.

Even so, TransUnion forecasts that severe delinquency rates on cards will remain near current low levels in the fourth quarter.

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37 Comments

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dcsea6227

When you don't pay off your cards in full, the price you end up paying for something may end up being more than you would have thought reasonable to pay for your purchase. I think that lots of Americans don't even factor the interest they will pay into their decision when buying something or trying to figure out if the sticker price is a "good deal." Bills.com has a new debt consolidation tool that helped me figure out the real cost of the debts I am carrying. www.bills.com/debt-consolidation-calculator

November 26 2012 at 4:59 PM Report abuse rate up rate down Reply
cpo1514

WOW... imagine that... four years of no National budget (thanks Barry) and Forward is the mantra? Perhaps Barry will finally learn how to manage a country... he is a wasted Harvard graduate. And the same folks want more.... ??

November 21 2012 at 8:10 AM Report abuse +1 rate up rate down Reply
joper201

How is this possibe?????
Obama keeps telling us things are geting better.

November 20 2012 at 12:45 AM Report abuse +1 rate up rate down Reply
madmaxt11

Everybody thinks they should live like a celebrity. They use YOLO (you only live once) as an excuse for irresponsible spending.

November 20 2012 at 12:07 AM Report abuse rate up rate down Reply
cdaviddrum

I don't see how anybody keeps up with any credit card debt, given the userous outrageously high interest rates credit card companies are charging. I pay mine off every month.

November 19 2012 at 9:17 PM Report abuse rate up rate down Reply
1 reply to cdaviddrum's comment
kafrench34

Credit cards can be usefull if used correctly. I use CC's for major things like a new roof, AC needed replaced, medical bills. My interest rates are 3% on one anf 4% on another and one is 0 % for 18 months. I use balance transfers to keep rates low-but you need good credit to use balance transfers. My score is 780 and I owe almost 20K due to medical bills. But I have paid down over 10K in the last few years. Medical bills force alot of people into bankruptcy.

November 19 2012 at 10:33 PM Report abuse rate up rate down Reply
rymic

I dont' have any debt, I pay all my bills in 30days, always have. If I don't have the money, I don't use the credit cards...what a concept!!

November 19 2012 at 9:06 PM Report abuse rate up rate down Reply
1 reply to rymic's comment
Wm Good

That's exactly what I do. I didn't always but I learned. CC balances don't go down nearly as fast as they go up. To me there's nothing like seeing a zero balance on the CC's at some point each month. I treat them just like cash. They are convenient and for me a wonderful tool that costs me nothing since I have them zero'ed out before the monthly due date. Mc Donalds a couple of years ago started taking CC's because the average spender will spend 47% more if he charges it instead of shelling out the cash. In my opinion it's CC's that draw people into bankrupcy aside from the number one cause major illnesses.

November 26 2012 at 12:22 PM Report abuse rate up rate down Reply
gary

0, that is my credit card debt. 0 is my auto debt....0 is my home debt.....Yet, I have to listen every day to people drowning in debt about how Obama's plan for the economy is superior. I do not think they are in a place to draw a well informed conclusion on the matter.....FORWARD to your bankruptcy.

November 19 2012 at 8:53 PM Report abuse rate up rate down Reply
LizAndrsn

Spin, spin, spin -- that's all it is.
People get fed up living like paupers and splurge a little, relying on some report that says it's great and getting better. But then the bill comes, nothing has changed, and The People forget that instant gratification does not provide long term satisfaction -- and they'll do it again.

Too bad the people that work these stories don't live in the real world.

November 19 2012 at 8:00 PM Report abuse +3 rate up rate down Reply
Gumby

I think that the biggest reason for debt piling up is car repairs.. Cars are getting old and many of us no longer can afford to buy another.. Hanging on them is very expensive. We ought to start car sharing now.. This will mean we will drive less but have a better control of the high fixed costs of owning a car which we no longer need to. We also should carpool if we commute. Car ownership is outta sight in costs . Ten air bags in a car is what blew a hole in our pockets.

November 19 2012 at 7:09 PM Report abuse rate up rate down Reply
1 reply to Gumby's comment
cpo1514

Not to mention the "new normal" from the Occupant & his budget mess.

November 21 2012 at 8:12 AM Report abuse +1 rate up rate down Reply
shadow

It's the Obama way. Order whatever you want and the guy behind you has to pay for it.

November 19 2012 at 6:35 PM Report abuse +1 rate up rate down Reply