Why Consumer Credit Card Delinquencies Remain Low

TransUnion, a national credit reporting agency, recently released findings that show an overwhelming number of people are paying their credit card bills on time and limiting how much they are charging.

It may come as a surprise that credit card delinquencies (defined as 90 days past due—or more—on a payment) are at the lowest level observed in the last 17 years. Given the difficult economic times and high percent of unemployment in the U.S., you may expect quite the opposite—that more people than ever would be having problems making credit card payments on time.

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TransUnion also found that the average credit card debt per borrower has remained relatively flat at approximately $4,700. They found that consumers paid an estimated $72 billion more in payments than what was purchased between the first quarters of 2009 and 2010. This compares to five years prior, when consumers made an estimated $2.1 billion more in purchases than payments.

Some reasons why this phenomenon is happening:

Many consumers are becoming more conservative with their assets—saving more and paying down debts.
Lenders have become more conservative in granting credit—requiring high credit scores, verifying income, offering lower credit lines—which has reduced the number of higher-risk accounts in their portfolios.
Many of the very high-risk account holders from the previous quarters have been charged off by the banks.

Those consumers who are paying down their credit card debt and making payments on time will receive positive points for such activity that will help to increase their credit scores overtime—which will help them be better equipped to meet the higher credit criteria now required by many lenders.

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Image: Kirby Urner, via Flickr.com