Consumers Continue to Pay Down Credit Cards

Equifax, one of the three national credit reporting agencies, released their latest National Credit Trends Report for December 2011. This report shows reduction in credit card write-offs compared to 2010.  This is based upon consumers paying their retail and bank card accounts on time and paying down their balances.  This downward trend has continued for the past 18 months.

Changes in past 18 months

Bank card write-offs were at their peak in July 2010 at nearly 13 percent. As of December 2011, write-offs were 5.53 percent, which was 39 percent lower than 2010 levels.

Retail card write-offs were at their peak in July 2010 at more than 14 percent.  As of December 2011, they were at 8.4 percent, which was 26 percent lower than 2010 levels.

Revolving card balances (bank and retail combined) peaked at $752 billion in October 2008 and have declined by 20 percent since then, except for seasonal activity.  In December 2011, revolving card balances were at $604 billion.

Total consumer debt outstanding also peaked in October 2008 at $12.4 trillion, while the total was $11.1 trillion in December 2011.  This is a decrease of more than 10 percent. Consumer debt included first mortgage, home equity, consumer finance, auto, student loan, retail credit card and bank credit card.

“Declining write-offs, growing card originations and the stabalizing of card balances are a precursor to balance increases, which can help to return the banks to profitability in this lending sectors.” said Michael Koukounas, SVP of Special Client Services for Equifax. “The industry is experiencing sustained improvement in consumers’ payment behavior and overall reduction of debt, a trend that seems to indicate more responsible lending and borrowing habits among card issuers and consumers alike.”

This shows that consumers have continued to pay their bills on time and to pay down their balances.  I hope this trend continues and that consumers are beginning to learn how to live within their means.

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Monitoring, Credit Report, Money & Identity

This post was written by John Ulzheimer