Smart Borrower Blog

Archive for the ‘Credit Card Debt’ Category

Spending is On the Rise while Credit Card Defaults Continue to Fall

All but one major credit card issuer reported decreases in their customer default rates for April. This, coupled with a rise in credit card spending, indicates an improvement in overall financial health of the average consumer. Here’s the how the numbers fleshed out, according to the Associated Press: American Express had the lowest late payments rate at 1.7 percent, down from 1.8 percent in March. It’s charge-off rate (a measure of uncollectible card balances) fell to 3.5 percent from 3.7 percent. CitiGroup’s delinquency rate fell to 3.87 percent in April, down from 4.21 percent the month before. The bank’s charge-off... more »

Big Banks are (Slowly) Opening the Lending Spigots

The latest survey from the Federal Reserve found that some banks are in fact starting to loosen their almost impossibly high lending standards as the economy starts to pick up. “The April survey indicated that, on net, bank lending standards and terms generally had eased somewhat further during the first quarter of this year,” the Fed wrote in its quarterly survey of senior loan officers. The impetus for this easing may have been an improvement in borrower credit-worthiness. The report found that 55 percent of domestic banks saw better credit quality among their large and middle-sized loan applicants. Thirty-five percent... more »

New Credit Card Rule Could Keep Moms From Money

The Federal Reserve has added one more change to the credit card rules in a market already reeling from sweeping shifts mandated by Congress. The addition is this: credit card companies must consider only individual income, not household income, for each applicant. While this rule was most likely designed to target college students, it may inadvertently leave some stay-at-home moms out of the credit loop. Without their own income, many women may be restricted to either using pre-loaded credit cards or their husbands cards as authorized users. This situation may work for some, but could prove very troublesome for others.... more »

Study: South Claims the Lowest Average Credit Scores

A recent report from credit monitoring company Experian found that the average credit scores have been going down in the South, but have remained strong in the Midwest and West. Based on the VantageScores, the credit ratings created by the three major credit reporting bureaus, 22 of the 25 U.S. cities with the lowest scores during December 2010 were in the South. Texas itself had seven cities on that list including Harlingen, El Paso, Tyler, Waco, San Antonio, Dallas and Houston, in order from lowest to highest. The only non-southern areas to make the bottom 25 list were Las Vegas... more »

Study: New Laws Have Not Diminished Credit Availability

New regulations put in place for credit card companies last year are having a positive impact on consumers, according to a study from research group Center for Responsible Lending, and at the same time credit available has not shrunk as previously feared. The Credit Card Accountability Responsibility and Disclosure (CARD) act passed in 2009 was designed to protect consumers by creating more transparency in credit card company practices. For example, the Act that took effect about a year ago requires that companies give consumers notice 45 days before any big rate changes or penalty fees are added. It also forbids... more »

Americans Are Getting Fiscally Fit, and It Shows

It may have taken the Great Recession to break Americans out of their ‘pay as you go’ mentality, but they are starting to act more financially responsibly now. At least so say the latest reports from the Big Banks, according to a recent BusinessWeek article. Specifically, more American consumers are paying their bills on time, and defaulting less on credit cards and mortgages. Says BusinessWeek, “the reports are a sign that Americans are feeling more comfortable about their finances. Personal spending powers about 70 percent of the U.S. economy, and most economists say a fiscally fit consumer is critical to... more »

Auto Lending Taking Top Priority for Banks

Toronto-Dominion Bank (TD) has agreed to buy car loan company Chrysler Financial Corp. for $6.3 billion in cash as of Tuesday. Why is this pertinent information? Because it signals just how important auto lending has become to bank portfolios these days. Auto loans make up roughly 30 percent of all consumer debt, according to TD. Only mortgage loans and credit card loans have larger market shares, but car loans tend to be much safer than the other two, making them very attractive to banks right now. For example, according to credit bureau TransUnion, auto loans in the third quarter had... more »

More Seniors Start the Golden Years in the Red

Most people probably think of retirement as a period of life when the financial obligations hanging over your head fall away. Unfortunately, that is not a very accurate picture for many seniors today. According to a new survey by nonprofit CESI Debt Solutions, many seniors (54 percent) start their retirement with debt and 96 percent of those with debt at retirement age refused to delay their exodus from the work place. And now, not only are more than half of seniors retiring with outstanding debts, but more and more are getting into so much debt during retirement that they won’t... more »

Credit Card Usage Down by 8 Million Consumers

During the past year, over 8 million American consumers have stopped using credit cards for their purchases, according to credit bureau TransUnion. Gerri Detweiler of Credit.com was quoted in a CNN Money blog as saying it is “unprecedented” for consumers to “abandon” their credit cards. “I’ve been covering this since 1987 and I don’t recall numbers like that ever going down,” she said. “They’ve always gone up.” What can account for this dramatic drop in credit card use? There are basically two things at play here. First, many consumers with good credit are taking fewer financial risks and just paying... more »

Credit Card Delinquencies and Charge-Offs Continue to Show Improvement

Although the changes are still incremental, they are in the right direction. Delinquent credit card accounts decreased in October as did credit card company charge-offs for the most part. Charge-offs are the loans that card issuers basically give up on because the borrowers are highly unlikely to repay them. This means the card issuers take a loss on those accounts and move one. Delinquencies are often a good predictor of future charge-offs, so the fact that both of these moved downward last month is welcome news. “It’s nice to see that consumers feel more confident in at least being able... more »