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Charge-offs not causing lower debt

By Janna Herron ·
Wednesday, July 27, 2011
Posted: 3 pm ET

Pat yourself on the back. Credit card balances fell because you paid your bills, not because banks wrote off your accounts as uncollectible, according to a new study released Wednesday.

Credit reporting agency TransUnion found that credit card holders made $72 billion more in payments than purchases from the first quarter of 2009 to the same period last year. Compare that with five years before when consumers racked up $2.1 billion more in purchases.

That debunks some claims in the industry that the reason behind lower balances is more charge-offs by creditors.

"Our analysis shows that consumers have made a concerted effort to pay down their credit cards during these uncertain economic times," says Ezra Becker, vice president of research and consulting at TransUnion, according to the company release.

The study had more upbeat news. Americans owed $4,679 on average in credit card debt in the first three months of this year. That's a decade low.

And the good behavior came from everyone, not just those with the lowest credit risk. The majority of all credit card holders with credit scores from 501 to 850, with possible scores ranging from 150 to 900, were current or less than 60 days behind on their payments.

The findings underscore an earlier TransUnion survey that found consumers preferred using their own debit card for purchases rather than falling deeper in the debt hole.

Fifty-five percent of consumers said they use their debit cards over their credit cards in more than half of their daily purchases. Forty-seven percent reported they chose debit three out of four times.

Better to spend what you have than what you don't, unless you can pay it off every month.

So what about you? Have you chipped away at your credit card debt in the last few years? How did you do it?

Follow me on Twitter: @JannaHerron

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