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Americans charging less on new credit cards

By Leslie McFadden · Bankrate.com
Thursday, April 15, 2010
Posted: 2 pm ET

Americans are using new credit cards more lightly than in years past. Despite the economic environment and tighter access to credit,  balances on new bank credit cards have dropped as have overall debt-to-limit ratios on credit cards, according to a quarterly Experian-Oliver Wyman Market Intelligence Report released today. The average balance on newly opened bank credit cards is $994, compared with $1,315 one year ago and a high of $1,491 for the first quarter of 2008.

The utilization rate on new accounts is just 23 percent for the first quarter of 2010, compared to 30.6 percent in the third quarter of 2007.

Spending just $321 less on new credit cards may not be a whopping difference, but it's encouraging to see people using new cards more conservatively. Debt piled onto a new card is no longer at the mercy of arbitrary rate increases during the first year after account opening, thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009. Yet one of the exceptions to that is the expiration of a promotional rate, which must last at least six months. A balance not paid off by the end of the introductory rate is subject to the higher "go-to" rate disclosed in the terms and conditions.

Low balances are also good for the credit score. An important factor in scoring models such as FICO is how much total revolving debt you have compared with your total credit limit. The lower this ratio is, the better for the score.

One doesn't need to carry a low balance, though. What matters is the account balance each lender reports each month. Whether you paid in full isn't recorded on your credit report, so it can't influence your score.

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