Six of the top credit card issuers across the country released data recently that reveals the status of consumer late payments and defaults during the month of November. According to the credit rating agency Moody`s Investors Service, overall things are looking pretty good as trends seem to indicate the resumption of normal patterns of payment behavior following the dramatic upsurge of account defaults set into motion by the recession.
One noteworthy example is Bank of America, which reported a continuation in the decreasing numbers of credit card customers paying late or defaulting on their accounts throughout November. This is the lowest point for both offences that BOA`s credit card division has seen since before the start of the economic crisis.
Typically what happens towards the end of the year is that late payments actually increase. This continues into the first several months of the new year until people manage to pay off the bulk of their holiday purchases and income tax refunds provide a much-needed infusion of cash for some households.
The pattern of timely repayment of credit card debt can be attributed, in part, to the simple fact that fewer lines of credit have been extended to consumers over the past several years. Since the recession started, Moody`s estimates that the total amount of card balances that have been written off due to delinquency to be around $75 billion. This caused lenders to tighten their underwriting standards and only lend to the most credit worthy of consumers, which resulted in credit cards being left in the hands of more affluent individuals – those which are best able to repay their debts on time. According to estimates made by the credit reporting agency TransUnion, over 8 million customers have exited the credit card market since the very start of the Great Recession.
However, TransUnion claims to have detected a change in the attitudes of credit card issuers towards slightly riskier customers. According to data, nearly 250,000 new cards were issued to consumers carrying moderate credit scores during the span of time extending from June until September. It is a necessity for card companies to find new customers in order to grow their business. This is especially true on the heels of the past two years during which they dedicated the majority of their efforts in courting only big-spending, creditworthy customers.
This trend of more relaxed lending is forecast by experts to continue well into 2012.