Credit Card Debt Hits 8-Year Low

(AP)  The amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.

The average combined debt for bank-issued credit cards like those with a MasterCard or Visa logo fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.

The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.

Credit card debt remained the highest in Alaska, but slid 7 percent there to $7,148. A total of 22 states recorded debt higher than the national average.

Residents of Alabama paid off the most debt, dropping their average balance by 27 percent to $4,753.

More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year.

That's the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit. The rate fluctuates during the year, he said, but the improvement is more evidence that consumers are working to make sure their credit cards remain in good standing.

That concern reflects several economic factors, from the fear of unemployment to the fact that the collapsed housing market means it's harder to cash in on home equity when money gets tight. "You can't buy groceries with your house anymore," Becker said.

Reflecting the weak economies in the states hardest hit by the housing crisis, the delinquency rate was highest in Nevada, at 1.5 percent of cardholders, followed by Florida, 1.24 percent, Arizona, 1.11 percent and California, 1.08 percent. In all, 16 states fared worse than the national average for delinquencies.

The lowest delinquency rates remained in North Dakota, at 0.54 percent, and South Dakota, at 0.55 percent.

In a twist, Becker said the foreclosure crisis could be helping to improve the timeliness of credit card payments and lower balances. When people don't make mortgage payments, he suggested, they have a short-term cash boost.

"That can provide extra money to pay down credit cards," he said.

Besides paying down debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 percent from last year.

TransUnion predicts that the national delinquency rate will remain below 1 percent for the rest of the year. However, on the high end, the Nevada rate is forecast to edge up to 1.6 percent.

[JavMD]

NO KIDDING WE ARE PAYING DOWN OUR CREDIT CARDS...

WHAT A TERRIBLE THING THE GOVERNMENT AND BANKS HAVE DONE ! Rescueing banks, lending overnight basically at zero percent interest and Banks CHARGING double the interest rate from Nov 08 when Obama took over !
ARE YOU READING THIS... DOUBLE... I have an American Express account charging me 16%. Thats outrageous... I'm paying it down as fast as I can...
The Mafia doesn't charge that much... IF I buy anything on my Bank of America card it is 27% !
Government intervention in capitolism, saving some banks.. sure screwed things up... and the Government PRETENDING to put more rules on banks is a JOKE !
They should have put the interest rate at the 2008 levels ! Now we get screwed, and BANKERS get big bonus etc etc.
TERRIBLE ! TERRIBLE ! I resent the government and BANKERS !

The government should have let them go under for all those bum loans they made !

My tax dollars saved their behind and I get my credit card interest rates raised ! Outrageous ! The hatred I have, I need to go to church... I can't even donate to the church for having to pay down my credit card ! Fixed income and medical bills as a senior ughhh

[inketolstoy]

Maybe we are learning from this recession....maybe.

[gruven13777]

This makes sense since most credit card companies bumped their interest rates up to 18%.

[jjoe57]

I'm not an economist, but the fact that many consumers are freeing themselves of credit card debt may eventually mean future spending (either from earnings by those employed or by others using their low-balance credit cards, again). Increased consumer spending to stimulate the economy, hopefully increase business production and hiring.

[surfcity5150]

well, time for me to go to work...People on Welfare are counting on me!

[tsigili]

That's a positive. It is absolutely essential, that people return to living within their means. Too much of the population, was living on overextended credit.

[renonv5]

This is excellent news. Keep up the good work and get rid of those cards! The banks that hand them out think they have you over a barrel and can charge whatever rate they feel like and create whatever fees they feel will rip you off, while reaping billions in profits. We need to turn this around and this is a good start.

[newsterI]

When people don't make mortgage payments, he suggested, they have a short-term cash boost."

Not if they are UNEMPLOYED! and if they lose the house they have to pay to move and live SOMEWHERE ELSE.

[GunsInTheSky]

Clearly good news, bad news.

Good news: People are spending less money that they don't have and living more within their means.

Bad news: With fewer well paying jobs, this is just another layer on why this recession will be with us for a while.

We are seeing the down side of a consumer based economy: when the consumer can't afford to spend more, the banks won't lend money to anyone any more, and/or the consumer decides to spend less.

America needs to start making tangible things again.