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Cardholders Charging Less, Making Payments on Time

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Consumers are now handling their credit card accounts more responsibly after going half a year with more troubling statistics coming out about their spending and repayment habits.

Instances of consumer credit card delinquency — defined as accounts that have gone 90 days or more without a payment — declined between the fourth quarter of 2011 and the first of 2012, according to the latest consumer credit statistics from credit monitoring bureau TransUnion. Now, that rate stands at 0.73 percent of all accounts, down from 0.78 percent a quarter earlier.

And at the same time, the amount of money being borrowed on those accounts also declined, the report said. At the end of the first quarter, the amount owed by consumers was $4,962 per person on average, down $242 from the total seen in the fourth quarter. Both the amount owed by the average consumer and the delinquency rate on these accounts had been rising since for the previous six months.

“After two consecutive quarters of increases in both the delinquency rate and average debt, it is encouraging to see a return to declines in delinquency,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “This contributed positively to a general trend since the bottom of the recession, which saw delinquency rates remain at near-record lows. Trends in average debt year over year suggest that little more than the usual seasonal influence is behind these changes.”

These improvements were seen even as credit card issuers continue to expand their efforts to lend to borrowers with subprime credit scores, the report said. The amount of new credit cards issued nationwide rose 20 percent in 2011 compared with 2010, driven by a 24.2 percent increase in lending to subprime borrowers, up from only 21.8 percent of all accounts given to these consumers the year before. That trend continued into the first quarter of this year, when subprime accounts made up 24.1 percent of new account origination.

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Consumers with subprime credit scores likely saw their ratings take a significant hit during the recent recession, but the improving economy has buoyed credit quality nationwide and helped to repair many consumers’ personal finances as well. Lenders, recognizing this trend, have once again broadened credit standards for new accounts.

Image: shawnzrossi, via Flickr

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