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As the economy continues to improve, many Americans find themselves in a better financial position and as a consequence continue to cut back on late payments made into their outstanding credit card debts.

The rate at which the nation’s credit card lenders had to write off consumers’ outstanding credit card balances as being uncollectable fell once again in December, according to the latest monthly data from Fitch Ratings. Now, the charge off rate for these types of accounts stands at just 3.98 percent of all balances, the first time defaults have slumped to less than 4 percent since 2006. The latest figure was a drop from 4.16 percent in November, and charge offs are now 29.43 percent lower than they were at the end of 2011.

On the other hand, the rate at which consumers fell seriously behind on their payments, but not so seriously that they defaulted on the accounts, ticked upwards, the report said. Accounts that are 60 days or more behind on payments now make up 1.73 percent of all outstanding balances, up from 1.7 percent in November. However, this may simply be a small fluctuation around a level that could be the new normal; late-stage delinquency has hovered near 1.7 percent for the last four months. That, likewise, could mean that charge offs will stabilize in the coming months as well, because changes in late-stage delinquency are often reflected in those for defaults some months later. However, it’s still important to note that accounts that are 60 days or more behind on payments have fallen about 25 percent on a year-over-year basis.

On the other hand, defaults on retail credit cards, which tend to be more volatile and risky than accounts issued by traditional lenders, increased significantly in December, the report said. Charge offs climbed substantially, to 6.69 percent from 4.69 percent in November, after having dropped some 20 percent throughout 2012. Nonetheless, the current level is still well below the all-time average of 9.09 percent. Meanwhile, 60-day delinquencies on theses accounts held steady near 2.7 percent, and have done so for the past seven months.

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Charge offs on any type of account can be extremely detrimental to borrowers’ credit ratings and as such, making all efforts to pay bills on time and in full is crucial to maintaining good financial health.

Image: ptmoney.com, via Flickr

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