Consumers gaining control of credit card spending

(MoneyWatch) Consumers are getting better at managing credit card debt, according to TransUnion, one of the big three credit reporting agencies in the U.S.

Both credit card delinquency and the average credit card debt per borrower was down year-over-year in the third quarter of 2013. Delinquency -- defined as consumers being 90 or more days late on payments -- stood at 1.36 percent in Q3, which was down from 1.50 percent in the same period of 2012. Average debt per borrower was down 1.3 percent year-over-year and up only $9 over Q2 in 2013.

Also, Country Financial found in its latest survey that 61 percent of consumers plan to use cash to pay for most of their holiday purchases and 56 percent said they are unwilling to take on more debt for holiday shopping.

Do these survey results mean people are getting better at managing their debts? Not necessarily. The average debt still stands at $5,235 per borrower, a staggering sum when you think about the typically high interest rates that even the least expensive cards command. According to Bankrate.com, the average credit card interest rate the week of November 14, 2013 was 13.02 percent for fixed rate cards and 15.35 percent for variable-rate cards.

To put this into perspective, according to a Bankrate.com calculator, to clear that average debt, assuming the 13.02 percent interest rate, in two years would take monthly payments of $250. At $100 monthly payments, it would take six-and-a-half years to clear the debt.

In addition, the definition of delinquency can be deceiving, because it only recognizes when consumers are nearly three months late making minimum payments. If there was a recent trend where people were having difficulty making payments, it would go unreported because it cut short of that 90-day mark.

There are signs that Americans are just shifting their spending habits. Gift cards are getting more popular. According to Equifax, another credit reporting agency, consumers are moving from general purpose credit cards to store-branded credit cards. One reason may be the discounts offered by the stores, which bank on additional revenue from the interest rates to make up for the offered discounts. Another reason may be that consumers use store cards for larger purchases and save general purpose credit cards for smaller purchases that will be paid off each month. 

Consumers who got into financial trouble during the recession might also find it easier to get credit directly from stores, which are anxious to make sales.