TransUnion has released a new report on credit card debt trends — and the news is good for both borrowers and the credit card companies.
The credit card delinquency rate is down by nearly one-quarter since this time last year, bringing the overall rate down to 0.83 percent. The delinquency rate is defined as the percent of credit card borrowers with delinquencies of 90 days or more. (You know, the really bad kind of delinquency that will decimate your FICO credit score.)
TransUnion’s Trends data base revealed some other interesting facts and figures for the third financial quarter. Most interesting, credit card usage has dropped, overall, with 8 million Americans who simply stopped using their bank-issued, general purpose credit cards this year, bringing the total number of non-credit card users up to 78 million in the U.S. The number has dropped by 10 million since Q3 last year, making “non-credit card users” the fastest growing group of consumers in the U.S.
TransUnion analysts attribute this in part to “charge-offs in the higher-risk segments of the population, more conservative spending in the low-risk segments, and significant efforts by consumers across the board to maintain the health of their credit card relationships as a financial cushion.”
Customers with higher incomes, the TransUnion press release says, were just as likely to stop using their cards as lower-income customers.
It’s nice to think that Americans are getting more conscientious about credit card spending, but could it be that we’re actually getting tired of rising finance charges and annual fees? This could also be a side effect of the credit crunch, when credit card companies lowered credit limits rather indiscriminately. In an effort to protect their credit scores, some Americans may have stopped charging to preserve their debt-to-available credit ratio. (I know I did!)
Some Americans turned to other options, such as pre-paid debit cards or even charge cards with generous rewards and benefit programs, too, I’m sure.
Some other interesting facts about debt in America, according to the TransUnion study?
- The national average credit card borrower debt is down 11.54 % (bringing it to $5,612) from Q3 2009, but is up slightly from last quarter. This is because the number of active users has dropped disproportionate to the amount debt has dropped — giving a slightly higher “debt per user” number.
- All but 15 states showed an increase in average credit card debt from Q2 2010, with the largest increases in West Virginia, Wyoming and Hawaii.
- Alaska has the highest average credit card debt ($7,159 per person), then Hawaii ($5,716) and North Carolina ($5,640.)
- Iowa has the lowest average credit card debt with $3,807 per person, followed by North Dakota ($4,103) and South Dakota ($4,196).
- Only two areas had an increase in credit card delinquency: Washington, D.C., and Mississippi.
With the credit crunch over, according to many experts, delinquencies (risk) down, and credit card use also down, will credit card companies get more aggressive in their marketing? Are better offers — higher rewards, lower interest rates, lower annual fees — on the horizon?
That remains to be seen.
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