Managing Debt

Late Payments Slip in 3rd Quarter

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The rate at which Americans fell 30 days or more behind on their payments, both for revolving and nonrevolving accounts, slipped in the third quarter of 2012 as borrowers continued to get their finances under control.

The overall delinquency rate across many types of borrowing slipped to 2.16 percent of balances between July and September, from the previous quarter’s 2.24 percent, according to the latest quarterly American Bankers Association’s Consumer Credit Delinquency Bulletin. The most recent delinquency rate is now well below the average of 2.4 percent observed during the past 15 years.

“Consumers are paying close attention to their finances as they continue to pay down debt in an uncertain economy,” said James Chessen, ABA’s chief economist. “The conservative approach consumers have taken to credit over the last several years has allowed them to better manage their debt and better position themselves for the future.”

The biggest improvement of the quarter came, perhaps not surprisingly, from credit card delinquencies, the report said. Late payments on these accounts slipped to just 2.75 percent of all outstanding balances from 2.93 percent in the previous three-month period, and is now well below the 3.89 percent 15-year average.

Further, it’s the lowest delinquency rate for credit card use seen since 1994, the report said. However, this is also more or less in line with improvements seen in many quarters in the past few years, as consumers have been extremely conscientious about slashing their outstanding credit card debts.

Other types of delinquency were more of a mixed bag, however, the report said. For instance, while delinquency on direct auto loans – those issued straight from lenders, rather than through a third party – ticked upward to 0.95 percent from 0.92 percent, those for indirect auto loans shrank considerably, to 2.08 percent from 2.23 percent.

Further, late payments on home equity loans climbed to 4.2 percent from 4.09 percent, and those for home equity lines of credit rose slightly to 1.93 percent from 1.91 percent, the report said. On the other hand, property improvement loans contracted marginally to 0.89 percent from 0.9 percent.

Late payments can take a heavy toll on consumers’ credit standing and finances alike, and as such, it’s important to make sure all bills are paid on time and in full.

Image: manwithface, via Flickr

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