Credit card debt drops to lowest level in 8 years

[FBaggins]

The amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.

The average combined debt for bank-issued credit cards -- like those with a MasterCard or Visa logo -- fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion. The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.

...snip...

More borrowers also made payments on time. The rate of cardholders past due by 90 days or more fell to 0.92 percent in the second quarter, from 1.17 percent last year. That's the first time the delinquency rate has been below 1 percent since the second quarter of 2007, before the recession, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit.


http://finance.yahoo.com/news/Credit-card-debt-drops-to-apf-3078079176.html?x=0&sec=topStories&pos=1&asset=&ccode=

[AndyA]

1. I'm glad that people are paying down their debt.

Hopefully, they will learn from this and not abuse credit lines again. Once people have their debt paid off, they will start buying things again, and that will help the economy. I just hope they are responsible going forward and pay off their purchase before they buy anything else.

[Indydem]

2. Between fear payments and bankruptcy...

I am sure the credit card industry is shitting themselves when they see the numbers shrinking at lightning pace.

[dkf]

3. How do they calculate this?

Do they keep cards which are never used in these numbers?

[FBaggins]

4. Which number are you interested in?

In general, the calculations are based on the ongoing reporting to the credit union related to each account.

I'm not sure how a card that is never used would impact the results. They're not talking about the balance on the average card, but the combined balance for all such cards in a household. So it wouldn't matter whether you have one card with a $5,000 balance or five cards with $1,000 each.

[dkf]

5. So if a household pays their card off every month they are added to the guy with $10,000

For an average of $5,000? Or is the average balance of those who have balances the figure being reported?

[FBaggins]

6. I believe that's correct.

I think the denominator is the universe of people who have bank credit card lines on their credit report with TU... even if they carry no balance. OTOH, I haven't carried a balance in many years, but two of my cards show up on the report with mid-size balances.

Looking again this is different than the figure I'm used to seeing (household) and is an individual figure (which could itself throw things off because the balance on one card shows up on both individual credit bureaus but is a single balance).