Consumers Make Progress With Timely Credit Card Payments

In the latest quarter, consumers stayed current on their credit card payments at an impressive rate, according to data from credit reporting bureau TransUnion. Of all credit card accounts during the second quarter of 2011, only 0.6 percent were delinquent by 90 days or more, representing the lowest rate in 17 years. This number is down 19 percent from the first quarter this year and down 35 percent from the same period of 2010.

A major reason for the falling rate is simply that Americans are shedding their credit card debts. The New York Federal Reserve Bank said recently that total consumer debt, which includes credit cards as well as auto and student loans, as well as mortgages, fell $50 billion in the second quarter to $11.4 trillion. That is down 8.6 percent from 2008′s third quarter, the heart of the recession.

TransUnion also found that Americans payed roughly $72 billion more in credit cards payments than they did on purchases from the first quarter of 2009 to the first quarter of 2010, highlighting more grounded financial behavior than in 2004 when consumers made $2.1 billion more in purchases than in payments.

While responsible borrowing certainly played a role in the drop in delinquency rate, other factors were also key. First, during the course of the recession, accounts that were consistently seriously delinquent were generally canceled or charge-offed by credit card lenders, taking them out of the equation. Second, banks have been much more restrictive with new credit, stepping up the credit history requirements for new borrowers.

“Those approved are less likely to default even in the face of continued high unemployment levels,” said Ezra Becker, vice president of research for TransUnion as quoted in a USAToday article.

This trend of timely payments is likely to carry on as consumers continue to put a higher priority on paying down consumer debt than even on making mortgage payments.