New Study: Consumers Better With Their Credit

Americans have generally been very good about paying their credit card bills on time since the end of the recession, and that trend continued in April. However, the number of seriously late accounts the nation’s largest credit card lenders wrote off as being uncollectable increased for the first time all year in April, largely due to a calendar oddity for Citi, which gave the institution an additional three days to strike delinquent accounts from its records, according to new statistics from Fitch Ratings. In all, the charge-off rate increased to 5.44 percent of all balances, up from 5.17 percent in the same month last year. However, discounting the accounts added because of Citi’s extra time to strike balances from its books, the charge off rate remained more or less flat.

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Meanwhile, the rate at which consumers allowed their slightly delinquent accounts to fall 60 days or more behind on payments slipped once again in April, dipping to just 2.03 percent of all balances, the report said. That’s down from 2.14 percent a year earlier, and a low not seen in the past 17 years.

Even accounts that tend to have higher instances of both delinquency and default saw declines in both, the report said. Credit cards issued by retailers, which have broader qualification standards and therefore experience more late payments, saw defaults slip to 7.99 percent of all balances, close to pre-recession levels and down from 10.59 percent in April 2011. Meanwhile, 60-day delinquencies on these balances fell to 2.98 percent. This was the first time late-stage delinquencies on these accounts has been below 3 percent in six years, and continued to sink well below the average rate of 4.11 percent for this type of card since Fitch began tracking these metrics in 2004.

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In general, consumers have been far more conscientious in paying down their outstanding balances since the end of the recession, which has led to many having improved credit standings. During the economic downturn, millions could not make their payments on time and as a consequence, their credit scores declined significantly. Only recently have lenders begun opening new offers to these subprime borrowers.

Image: bandita, via Flickr