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Credit Card Applications » News » Card Issuers » Credit Card Delinquencies Still Declining as Customers Pay Down Debt

Credit Card Delinquencies Still Declining as Customers Pay Down Debt

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Americans are finally getting the message: save more, borrow less, live within your means, and make payments on time.

At least, that’s what recent data from the American Bankers Association seems to reflect. Delinquency rates on bank-issued credit cards are at their lowest rate since 2001, with only 2.93 percent of account 30 days or more overdue. The average delinquency rate over the past 15 years is 3.91 percent, and even in the first quarter of 2012 the rate was above three percent.

The dip in delinquencies may reflect a growing trend of financial responsibility in American households, as people strive to save more and spend less, or at least spend within their means. Using credit cards as an emergency fund might have contributed to growing debt during the recession, but as the economy recovers consumers are better able to keep up with household expenses and make credit card payments on time.

Paying Down Debt and Saving Money

CNN Money reports that James Chessen, chief economist at the American Bankers Association,  said “Consumers are saving more and borrowing less as they work to pay down debt at a faster rate.” Speculating on the motivations behind these numbers, Chessen said that “economic uncertainty has made consumers hesitant to take on new debt, and building a stronger financial base has become a priority.”

This summer, the Federal Reserve Bank of New York reported that credit card delinquencies were at their lowest level since 2008, and that credit inquiries were falling. Balances were lower as well, dropping 22 percent from their highest point, reached in 2008.

Credit Card Debt Down While Other Loans Rise

The news isn’t entirely good, however. Across the board, debt isn’t necessarily down, as customers who make credit card payments a priority are often falling behind on student loans, auto loans, and home improvement loans, says the American Bankers Association.

Since credit card debt tends to be at a higher APR than other types of debt, such as student loans, people may choose to keep current on their credit cards and let other debt build  up. Overall, ABA’s Chessen was not optimistic, saying that, “The lack of broad-based improvement gives us pause about the future. Slow job growth and continued uncertainty means many consumers will face challenges managing their debt going forward.”

For consumers looking to pay down debt faster, avoiding credit altogether might not be the best move. Transferring balances to a zero interest balance transfer credit card can be a good option, allowing customers to pay the same amount to their credit cards each month but have more of the balance go toward principle instead of interest.

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