Revolving credit takes a dip in the US

TransUnion, one of the three biggest credit reporting agencies has reported on the timely payments by borrowers in the first quarter of 2012.

U.S. credit cardholders have caused a spike in timely payments and a large dip in overdue payments within the first quarter of 2012.

Is this a sign that that families are battling the recession? Or is it a case of borrowers making it a priority to dig themselves out of debt?

In either scenario, timely payments are certain to boost borrowers’ credit scores and indicate a turn-around in personal finances.

Alex Veiga of the Associated Press reported that despite the continuation of banks that are issuing credit cards to borrowers with less than ideal credit, cardholders have shown this year that their payments are more timely than they have been in months. Veiga reports that in the fourth quarter of 2011, the rate of payments that were at least as much as 90 days late was 0.78 percent, and in the first quarter of 2011 it was 0.74 percent. According to TransUnion, in the first quarter of 2012, the rate dipped to 0.73 percent.

 Charlie Wise, the director of research and consulting for TransUnion, stated that the overall trend since the recession began in 2007 has been delinquency rates declining fairly steadily. Wise was quoted in the article as saying, “We are now seeing that, when given a choice, consumers are overwhelmingly paying their bankcards before they're paying their mortgages.”

The article is quick to point out however that though the rate of late payments has dipped, the average cardholder has actually been adding to their debt. Veiga reports that from 2009 to 2011, the trend in cardholders to refrain from using credit in a clear effort to chip away at their debt, however credit card balances grew 6.1 percent in the first quarter of 2012 versus where they were at the same time in 2011. Veiga writes that one factor in this movement of adding to already-existing debt is a consumer confidence in the U.S. economy, causing borrowers to spend more or lean on credit more frequently.

A press release from TransUnion reports that though credit card use is still high, the first quarter of 2012 saw a dip of $242 on average (down to $4,962 from $5,204 in the fourth quarter of 2011.) In the second half of 2011, both the payment delinquency rate and the average debt per credit card holder rose, and is fortunately already turned around in the first 3 months of 2012. However Ezra Becker, the vice president of research and consulting in TransUnion’s financial services business department, believes that the fluctuating rates in delinquency and credit card use can be chalked up simply to seasonal influences. Becker is quoted as saying, "Trends in average debt year over year suggest that little more than the usual seasonal influence is behind these changes. Since we rarely see significant increases in either category at this time of the year, this movement isn't significant enough to suggest much more than a return to the status quo of early last year."

What’s happening in your market ? Do you have any figures to share ?

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