Credit Card Write-Offs Decrease as Balances Increase - Other News

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Credit Card Write-Offs Decrease as Balances Increase

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Credit Card Write-Offs Decrease as Balances Increase

Credit balances were at their highest level in five years as of November 2014, according to Equifax’s National Consumer Credit Trends Report. Not including mortgages, credit balances from auto loans, store credit cards and bank credit cards totaled $3.1 trillion.

Auto loans accounted for the biggest chunk of consumer debt, with a balance of$965 billion—a 9.6% increase over last year. Bank credit cards came in second place, with a total of $611.7 billion owed. That represented a 4.7% year-over-year increase. Store credit cards saw a 4.8% increase, with a balance of $71 billion.

While balances were going up, write-offs were going down. The total balance of write-offs, again excluding mortgages, was at its second-lowest point in eight years, at $73.4 billion. Home financing write-offs also hit a second-lowest mark, at $91.2 billion.

Consumers spending more on education, durable goods

Equifax Senior Vice President and Chief Economist Amy Crews Cutts attributed the increase in balances to what she called the end of “the Great Develeraging,” saying that consumers “are back in the borrowing business,” but are borrowing differently from the way they used to, placing more value on investment such as education and “durable goods like cars.” Cutts said this is a positive sign for the economy in the long-term, but that in the short-term, “sluggish consumption slows economic growth.”

Cutts cited the growth of student loans, which climbed from 20.2% to 37.3% over the last year, and noted that although retail and bank credit card balances have growth, the percentage of consumer debt they represent has actually decreased. Last year, retail and bank credit cards accounted for 31.4% of consumer debt, compared to only 21.9% this year.

Retail and bank credit cards both see increased balances

There were 28.5 million new retail credit card accounts issued between January and September 2014, the most since 2007 and a 2.5% increase over last year. The balance of new credit during that time period was $48.1 billion, a 3.4% year-over-year increase. Write-offs decreased by 0.34 percentage points, representing 7.44% of total balances.

During the first nine months of 2014, $183.9 billion in new credit originated from bank-issued credit cards. That’s a jump of 25.9% from the same period in 2013. There were 37.7 million new bank credit cards issued from January through September 2014, the most in six years and a rise of 20.1%. Write-offs for bank cards were at 3.47%, down from 3.94% in November of last year.

All credit cards terms, fees and rates mentioned in this article/post are actual on the posting date. See the current products’ Terms & Conditions on the issuing banks' websites.
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