Credit Card Delinquencies Fall as Balances Grow

Consumers seemed to get a better handle on their outstanding debt over the course of last year, but spending on those accounts increased as well.

Credit card accounts that were 90 days or more behind on payments slipped to just 0.78 percent of all balances at the end of 2011, down close to 5 percent from the total seen at the same time the year prior, according to the latest data from the credit reporting bureau TransUnion. That’s down from 0.82 percent. However, that figure was also close to 10 percent higher than the 0.71 percent observed at the end of the third quarter.

But those declines were still close to all-time historic lows, the report said.

“[Last year] closed out with the lowest year-end card delinquency rate nationwide since 1995,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “This is the net result of riskier loans having worked their way through the system, cautious risk management strategies on the part of lenders and consumers working to maintain the health and good status of their card relationships.”

The states with the lowest delinquency rates were Alaska and North Dakota, with just 0.41 and 0.42 percent of balances 90 days or more behind, respectively, the report said. Alaska also had the largest year-over-year decline in delinquency, dropping 24.07 percent from 0.54 percent of balances. Meanwhile, Mississippi had the highest delinquency rate in the nation by far, at 1.25 percent.

But as consumers made more conscientious efforts to make sure their bills were paid on time, the same care was not taken in assuring that their balances remained low, the report said. The average amount owed to lenders at the end of last year rose 4.8 percent to $5,204 on a year-over-year basis, up from the $4,965 at the end of 2010. But this change was driven entirely by increased spending in 2011’s fourth quarter, when balances rose 9.27 percent in just three months. At the end of the third quarter, consumers’ average balances had actually fallen to $4,762.

Experts have noted that the holiday shopping season and the slowly improving economy creating a better sentiment among consumers combined to generate a better borrowing environment, and that increases in both balances and delinquencies become more likely during this time every year.