Credit Card Debt Continues to Fall

December 9, 2009, Written By Bill Hardekopf

Data released this week by the Federal Reserve shows that the consumer debt continues to decline.

The Federal Reserve Consumer Credit report reveals that credit card debt fell in October for the 13th consecutive month. Revolving credit, the majority of which is credit card debt, decreased at an annual rate of 9.3% in October. It has fallen $88 billion since October of 2008, from $976.1 billion to $888.1 billion.

Another credit card statistic shows the delinquency rate is also dropping. The delinquency rate, which shows loans that are 30 days or more past due, was 1.10 percent in the third quarter of 2009 and is expected to fall to 1.07 percent by year’s end. By December of 2010, TransUnion predicts that 90-day delinquencies will drop to 1.04 percent.

The overall decrease of credit card balances is a very good sign for consumers. Consumers seem to be taking charge of their credit card and are paying down some of their debt. Consumers could be upset at the very high interest rates and fees that credit card issuers have put on their accounts throughout 2009, and they are shying away from using their cards.

According to the National Retail Federation’s 2009 Holiday Consumer Intentions and Actions Survey, only 28.3% of holiday shoppers plan to use credit this year compared to 31.5% a year ago, a 10% decrease. This is further underscored by a recent USAA survey, which showed more than half (55%) of the respondents are planning to avoid charging their holiday purchases. Among the shoppers who plan to use their credit cards, 74% plan to pay off their balance immediately so that they do not pay interest.

But credit card issuers themselves may be responsible for much of this drop in revolving credit. Issuers have closed many credit card accounts and have tightened approval rates, making it harder for some consumers with marginal credit to qualify for a credit card. In addition, credit card issuers have cut the credit limits on many customers.

According to a FICO study, credit card issuers cut limits for an estimated 58 million cardholders for the twelve months ended in April 2009. Issuers are continuing to cut limits to reduce their risk of lending money.

Right now, consumers aren’t consuming and lenders aren’t lending like they used to.


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The information contained within this article was accurate as of December 9, 2009. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.