Credit card debt has been a significant problem for millions of Americans. 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 % from $5,719 in the same period a year ago, according to Trans Union. 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. In years past homeowners would take out a second mortgage for credit consolidation, but now those types of loan programs are no longer available. Secure debt consolidation loans, like 2nd mortgages are difficult to find without owning a home and having a lot of home equity.
Negotiate Credit Card Debt and Save!
Credit card debt remained the highest in Alaska, but slid 7 % 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 % 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 % in the second quarter, from 1.17 % last year.
That’s the first time the delinquency rate has been below 1 % since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in Trans Union’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 % of cardholders, followed by Florida, 1.24 %, Arizona, 1.11 % and California, 1.08 %. In all, 16 states fared worse than the national average for delinquencies.
The lowest delinquency rates remained in North Dakota, at 0.54 %, and South Dakota, at 0.55 %. 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 loan payments, he suggested, they have a short-term cash boost. “That can provide extra money to pay down credit cards,” he said. Besides paying off and refinancing debt, consumers are getting fewer new cards. Nationwide, the number of new accounts opened dropped almost 6.5 % from last year. Trans Union predicts that the national delinquency rate will remain below 1 % for the rest of the year. However, on the high end, the Nevada rate is forecast to edge up to 1.6 %. See the original article online
