LOS ANGELES, Calif. – Americans got better about paying their credit card debt on time in the first three months of the year, a period when many borrowers use income tax returns to tackle their holiday season debt.
The rate of credit card payments at least 90 days overdue fell to 0.69 per cent in the first quarter from 0.85 per cent a year earlier — drop of nearly 19 per cent, credit reporting agency TransUnion said Tuesday.
The January-March card delinquency rate was also down from 0.73 in the October-December quarter, when many consumers ramped up credit use to finance holiday season purchases.
Neither a 2 per cent hike in Social Security payroll taxes that took effect in January, nor delayed federal income tax returns this year appeared to blunt borrowers’ ability to manage their debt.
While down, the late-payment rate is above historically low levels. The lowest late-payment rate on TransUnion records going back to the mid-1990s was 0.56 per cent, set in the third quarter of 1994. More recently, it was at 0.60 per cent in the second quarter of 2011.
All told, the card-delinquency rate has averaged 1.03 per cent since 1992, said the firm, whose credit trend data is based from a sample of 27 million consumer records.
“Even a moderate uptick in delinquency is not a cause for concern, because we are at historic lows,” said Ezra Becker, vice-president of research and consulting in TransUnion’s financial services business unit.
During the last recession, many Americans reined in spending in favour of paying off debt, particularly credit card balances. The housing downturn also prompted many homeowners to make paying their credit card accounts on time a priority ahead of other financial obligations, such as their mortgage payments.
Nearly four years after the recession, the U.S. economy and job market are far from fully recovered, but they have made steady progress.
The national unemployment rate remains at an elevated 7.5 per cent, but that’s down from a high of 10 per cent in October 2009. The economy has been steadily adding jobs, home values are rising nationally and the stock market has been on a sustained upswing, with the Dow Jones industrial average index up about 17 per cent this year.
Those factors have helped boost confidence among consumers, making them feel wealthier and more willing to spend.
Even so, many remain careful about how they manage their debt.
Average credit card debt per borrower fell 1.7 per cent to $4,878 in the first quarter from $4,962 in the same period last year, TransUnion said.
On a quarterly basis, it declined 4.8 per cent from $5,122 in the fourth quarter.
TransUnion, however, has forecast that average credit card debt will rise by roughly 8 per cent to $5,446 by the end of this year — the highest level in four years.
Meanwhile, the number of new credit card accounts opened by consumers continued to decline as 2012 drew to a close.
The data lags by a quarter, so the latest TransUnion figures cover the October-December period. They show that the number of new credit card accounts fell 1.6 per cent from the same period in 2011.
The share of cards issued to borrowers with less-than-sterling credit slipped to 28.1 per cent from 28.4 per cent a year earlier. That’s still above the 27.7 per cent share in the fourth quarter of 2010, however.
In the VantageScore credit rating scale, consumers with a score lower than 700 on a scale of 501-990 are considered non-prime borrowers.