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Credit card debt becoming more manageable

by Peter Andrew
Credit card debt becoming more manageable

TransUnion, one of the big-three credit bureaus, released data Tuesday about the number of credit card users who were 90 days or more delinquent on their accounts during the fourth quarter of 2010. The headline figures were very encouraging: only 0.82 percent were in that unhappy position, down a whopping 32 percent for the like period a year ago.

Credit card debt troubles in different states

That 0.82 percent was a national average of course, and the variations between individual states were considerable.

The three states with highest deliquencies were:

  1. Nevada 1.27 percent
  2. Mississippi 1.13 percent
  3. Florida 1.07 percent

The three states with lowest deliquencies were:

  1. South Dakota 0.55 percent
  2. Alaska 0.54 percent
  3. North Dakota 0.45 percent

Of the 13 states that showed increases in credit card delinquency rates between Q3 and Q4 2010, the three that fared worst were Kansas (up 7.5 percent), Mississippi (up 6.6 percent) and Delaware (up 6.2 percent). During the same period, the District of Columbia saw deliquency rates fall 17.8 percent.

Credit card debt in dollars

These percentages are all very fascinating, but the figures that are of most interest to individual credit card users are those expressed in dollars. They’re the ones that provide a benchmark against which people can measure their own balances.

Nationally, individual credit card debt (defined by TransUnion as: “the aggregate balance on all bank-issued credit cards for an individual bankcard borrower”) remained essentially flat between the third and fourth quarter of last year, increasing by just one dollar from $4,964 to $4,965. Again, there was a big spread between states, with the figure for Alaska being $7,010 and that for Iowa $3,915.

Those who recall the headlines that followed the Federal Reserve’s last monthly consumer credit statistical release may be surprised by this. In December, the Fed said revolving credit (which is nearly all credit card debt) rose for the first time in more than two years. However, the Fed’s analysis is monthly while TransUnion’s is quarterly. The difference between The Fed’s numbers and TransUnion’s numbers can be largely explained by the fact that there were declines in October and November, which offset December’s increase.

Year-on-year, TransUnion says credit card balances dropped 8.62 percent.

Other credit card news

TransUnion’s statisticians are busy. Earlier this month, it released three other interesting figures about the credit market:

  1. The Credit Risk Index fell in Q4 2010 for the fourth quarter running, returning the level of risk faced by lenders to the lowest in two years.
  2. Credit demand is slowing, but the rate at which it is slowing is falling. So a recovery in demand could be in the cards.
  3. The company forecasts that 90-day delinquencies on credit cards are likely to drop by more than 10 percent over the course of 2011.

In other good news, The Wall Street Journal reported Tuesday that the new Consumer Financial Protection Bureau is expected to say that credit card rates for those who already have accounts are finally stabilizing. “The results show that the financial industry has drastically scaled back interest-rate increases on existing cardholders,” according to the Wall Street Journal report.

Still many problems

It’s a pity to rain on this parade of positive credit card news, but another survey, also published Tuesday, suggests that the financial storm clouds are yet to completely blow over. The Princeton Survey Research Associates International found two key points:

  1. Just 52 percent of consumers have more saved for emergencies than they owe in credit card debt.
  2. As many as 26 percent of seniors (over 65s) have zero debt but also (and this is the scary bit) zero savings.

It seems that Americans have quite a way to go before acceptable levels of personal financial security are restored. We are heading in the right direction, however.

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