Smart Borrower Blog

Credit Card Debt and Delinquencies Decline in 2014 Q1


May 14th, 2014 @ 12:31 PM by Amber Nelson


U.S. consumers held less credit card debt in the first quarter of 2014 that the previous year, while simultaneously making more timely payments, a development analysts assert is a sign of a stronger economy.

According to credit collecting bureau TransUnion, the average debt per borrower fell to $5,164 in the 2014 first quarter, down from $5,325 in the fourth quarter of 2013 and $5,201 one year earlier.

At the same time, the delinquency rate – credit loans that are 09 days or more behind on their payments- fell to 1.37 percent in the first quarter, down from 1.48 percent the quarter before and 1.51 percent in the 2013 first quarter. Massachusetts had the largest decline in its delinquency rate, followed by Wisconsin and Illinois.

The total number of credit card accounts increased in the first quarter to 344.53 million, up fr4om 329.73 million the previous year. And those with less-than-perfect-credit make up a larger share now that they did a year ago. TransUnion reported that 28.95 percent of all new credit card accounts went to those with credit scores lower than 700, compared with 27.28 percent the year before.

“We see some positive signs in the market with more credit cards being issued although the sector as a whole is growing at a small rate,” said Toni Guitart, director of research and consulting in TransUnion’s financial services business unit. “It is also encouraging that delinquency levels have dropped on a year-over-year basis even though the share of non-prime consumers gaining access to card credit has increased. Together, these findings point to a healthy credit market.”

A separate study from the New York Federal Reserve found that even as they cut back their credit card spending, Americans are taking on more debt in other areas. Total U.S. debt rose 1.1 percent ($129 billion) to $11.65 trillion in the 2014 first quarter, the third consecutive quarterly increase.

“It’s reflective of a better economy— more people are working and there are lower levels of delinquencies–that is to be expected,” said Greg McBride, senior financial analyst at Bankrate.com. “If consumers don’t take on more debt, it will be difficult to grow this economy. We don’t want to see consumers take on too much debt, but it’s a positive sign to see, from an economic standpoint, to see consumers borrowing as long as we are not overdoing it.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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