Editorial Policy

Credit Card Holders Getting More Punctual With Payments

Marcia Frellick

October 5, 2012

Credit card users are on a good-behavior roll, an Oct. 4 report by the American Bankers Association says — and that has resulted in the lowest level of late credit card payments in 11 years.

Delinquent bank credit card payments, defined as payments that are 30 days or more late, dropped below 3 percent (to 2.93 percent) in the second quarter for the first time since 2001. That’s down from 3.08 percent in the first quarter and significantly lower than the 15-year average of 3.91 percent, the ABA reports.

Nervous consumers are thinking twice about charging up their cards, said James Chessen, ABA’s chief economist, in a statement.

“Economic uncertainty has made consumers hesitant to take on new debt, and building a stronger financial base has become a priority,” Chessen said.

Reining in spending
Discouraging job news may be helping to keep consumers focused on keeping debt low.

Although the unemployment rate dipped to 7.8 percent in September, according to the latest Bureau of Labor Statistics figures, it hovered above 8 percent for the entirety of the second quarter (the time period that corresponds with the ABA’s numbers). BLS statistics from the second quarter showed stagnant wages, and the number of long-term unemployed (those who have been jobless for 27 weeks or more) remained stuck at around 5 million (40 percent of the unemployed).

Increased vigilance in getting payments in on time is good news for credit scores because payment history makes up the biggest chunk– 35 percent — of a FICO score.

FICO considers how recent the late payments are, how big they are and how frequently they happen. The credit scoring company notes that you can recover from a late payment by getting current and not making that mistake again. What you don’t want to happen is for your creditor to either charge the debt off or send it to a collection agency. That’s considered a significant event, and your score will take a major hit.

Home loan payments not as prompt
While the ABA report showed progress on the credit card payment front, the news was not as rosy for payments on home loans. In the second quarter, delinquencies rose in all three categories of home-related loans. Property improvement loan delinquencies rose from 0.8 percent to 0.9 percent; home equity loan delinquencies rose from 4 percent to 4.09 percent; and home equity lines of credit delinquencies rose from 1.8 percent to 1.9 percent.

The numbers show homeowners are still struggling to pull out of the housing market collapse.

“While the housing market appears to have turned a corner, we are many quarters away from seeing improvement filter through to reduce home-related delinquencies,” Chessen said.