Consumers Learning To Balance Recession & Credit

While the economy was taking a tumble, and housing sales were plummeting to all time lows, consumers were struggling to make their credit card payments, in most cases choosing not to pay at all in order to keep food on the table or save their home from foreclosure. During the first quarter of this past year, credit card delinquencies were up to record-breaking levels.

Although people are still struggling, the good news in all of this economic mess is that consumers are starting to take back control. Like the tortoise and the hair, many credit card holders are learning the importance of making payments and regaining some financial dignity. Even as the economy slugs along, the most recent credit card delinquency numbers are showing a slight improvement.

Credit Card Delinquency Improvements

After five straight months of record highs and hurt credit card consumers, things might be turning around, according to Reuters.

Fitch's (Fitch Ratings) prime credit card charge off index, which measures the portion of credit card securitized loans that companies do not expect to be repaid, fell to 10.55 percent in July from 10.79 percent in June. (Reuters)

The first quarter of this year was extremely rough for homeowners and credit card holders. The record breaking credit card delinquency numbers show that without a doubt. But, even though the market hasn’t turned around yet, homes are still being foreclosed on all over the nation, and the unemployment has risen to over 10 percent at times, consumers are somehow managing to stay on top of things.

What is interesting to note is that as the credit card delinquency numbers improve slightly, the average credit card balance has literally stayed the same. Consumers are still using their credit cards to pay for the essentials, but are somehow finding a way to make those minimum payments at the end of every month.

This trend might not be a good sign. Sure, credit card holders are at least making their minimum payments and keeping things in order, but, according to the Associated Press, they are still using the credit to take care of groceries, bills, and gas, the very things that will get them into trouble with the credit card companies.

So, why are the credit delinquency numbers improving?

"Consumers are clearly managing their credit card obligations and lenders are clearly managing the risk in their portfolios," said Ezra Becker, director of consulting and strategy in TransUnion's financial services group. (AP)

Whether it’s the consumer or the credit card companies that are making changes to better delinquency numbers is unclear. But, what is clear is that something is slowly turning around, and with the new Credit Card Act that is taking effect it will be interesting to see how things end up in the next few quarters.

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