Consumer Comeback Blog

More Americans Paying Credit Card Bills on Time

American consumers may be seeing their credit card balances increase this year, but they are managing to pay their bills on time, according to a new report from credit reporting agency TransUnion.

Even as credit card debt increased 6%, the national credit card delinquency rate, or card holders who are at least 90 days late in making payments, dropped from 0.63% in the second quarter of 2012 from 0.73% and maintained the lowest levels in 18 years.

Paying your credit card bill on time is a major factor that contributes to your credit score.

The average credit card debt hovers just below $5,000, increasing from $4,699 earlier this year. But that number is still 13% or $700 less than three years ago during the height of the recession This news comes on the heels of earlier positive reports of mortgage delinquency rates reaching a three-year low, suggesting that Americans are getting a better hold on their finances.

More consumers are getting credit cards, as the number of card originations grew 4% over the last quarter, 26.1% percent of those cards were issued to non-prime borrowers, or people with credit scores of 700 or lower.

“While non-prime borrowers made up a slightly smaller percentage of all new trades in this latest quarter, they continue to gain more access to credit. In conjunction with the growth in the overall number of card originations in the last few years, it means that the credit card pie is bigger, and non-prime consumers are getting a bigger slice of that pie,” Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit, said in a press release.

“This is important to note, because one would think delinquencies would rise as non-prime borrowers gain more access to credit. We’ve found that consumers continue to value their credit cards more than ever and will likely do so at least until unemployment abates,” Becker said.

The report indicated that most of the country is showing positive signs on credit management, but five states –Hawaii, Massachusetts, North Dakota, South Dakota and West Virgina, and 20% of metropolitan statistical areas (MSAs) saw increases in their credit card delinquency rates. However, that number was higher last quarter when 28% of MSAs experienced an increase.

Based on consumer sentiment, disposable income, and employment conditions, TransUnion forecasts that car delinquency rates to continue at the same levels with the potential for seasonal fluctuations.