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More debt, late payments not bad

By Janna Herron · Bankrate.com
Tuesday, November 20, 2012
Posted: 3 pm ET

Credit card delinquencies and debt inched up in the third quarter, TransUnion reported this week.

The credit reporting agency said Monday that the percentage of borrowers at least 90 days past due on their credit card payments increased to 0.75 percent from 0.71 percent in the same July-September period last year. The average credit card debt rose by 4.9 percent in the third quarter to $4,996 per borrower, up from $4,762 during the same part of 2011.

The report suggests that consumers are having a tougher time paying their bills. But historically those figures are still very low. The average delinquency rate for every third quarter from 2000 to 2011 is 1.25 percent, or twice this quarter's average, says Ezra Becker, vice president of research and consulting at TransUnion. The average debt during that same time is $5,258, higher than this year.

"People make the mistake in thinking that any delinquency is bad, but that's not the case. There will always be delinquencies," Becker says. "The only way to reduce the delinquency rate to zero is for lenders to stop lending."

In fact, lenders are issuing more credit cards to consumers with less-than-the-best, or "nonprime," credit scores. The good news, says Becker, is that the delinquency rate remains low even though more risky consumers are using credit cards.

"These consumers are really taking their credit cards seriously and managing them well," he said.

What's your take on these new stats?

Follow me on Twitter: @JannaHerron

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5 Comments
Hodge
November 28, 2012 at 8:30 am

New Years Resolution: Plan Prepare and Prevent

artist
November 24, 2012 at 11:21 am

Um.

Hasibuzzaman
November 24, 2012 at 7:38 am

Madam,I am bangladeshy business man.I need world wide credit card need please help me.

Brian
November 22, 2012 at 11:59 am

First, you used the incorrect word manor, when should have used the word manner.

Second, Duh....that is basic economics. If people do not understand what you made mention to, then all the better for us. Call it......culling of the herd.

John
November 22, 2012 at 7:20 am

Nothing new about people taking on more debt. But to say its good is not looking at how that debt is used. If people are buying things that they simply cannot afford to pay down in a efficient manor. Then they end up hurting themselves by actually paying a lot more for something. That reduces their spending in the end. Because they don't spend wisely. Its one thing to buy a big screen TV knowing that in six months you can have it paid off. Its another to still be making a minimum payment a year from now on that same TV.
Sure, you might have got a great deal on the TV itself. But how much have you paid in interest charges before its paid off? This is the time of the year when people's emotions play a more important role in buying things. Sometimes those emotions cloud their realistic minds about how much they can really afford. Credit is a negative on any purchase if you cannot pay off that bill every month. How much you pay that credit card bank is up to you. The longer you wait to pay the bill, the less benefit you receive from credit cards.