Late Payments on Credit Cards Show Significant Decline
Overall credit card debt has dropped substantially since the recession several years ago. Consumers are carrying less of a balance on their credit card accounts. Cardholders are slowly shifting from being “revolvers” to “transactors.”
As a result, one major change that is taking place is the percentage of late credit card payments continues to fall. The American Bankers Association reported that late payments accounted for only 2.44% of all credit card accounts in the first quarter of 2014, down from 2.60% a year ago.
These delinquency figures on bank cards are well below the 15-year average of 3.82%.
The ABA says this drop is largely due to a transition in the way Americans treat their credit cards. Instead of using the cards as a way to gather debt, consumers are now using them to pay for single transactions which they then pay off at the end of the month.
“More and more consumers are using their credit cards as a payment vehicle, paying off or paying down their balances each month,” said James Chessen, chief economist at the ABA.
The composite ratio that tracks delinquencies in eight loan categories rose to 1.63% after two quarters of record lows, but this number is still far below the 15-year average of 2.33%.
“With an improving economy and continued consumer vigilance, we expect delinquency rates to fluctuate at this lower end of the range for the foreseeable future,” said Chessen.
Americans are learning how to use their credit cards without driving themselves into debt, which is a positive sign for the future of the economy.