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Credit card companies report fewer delinquent accounts

May 04, 2011

| Money Rates Columnist

The number of credit cardholders delinquent or defaulted on payments slipped in March, which was viewed as a sign that Americans are getting their financial house in order.

Called charge-offs in the credit card industry, the number of accounts 90 or more days behind on payments fell to 7.35 percent from 7.56 percent in February, according to Moody's Investor Service. The charge-off rate hit its peak in August 2009, according to Dow Jones newswire.

Accounts that are 30 to 59 days behind are considered to be in the early stages of delinquency. Those accounts fell to 0.98 percent, which Moody's said was the first time the rate has fallen below 1 percent since 2000. Accounts 60 days or more behind fell to 3.79 percent, marking 17 consecutive months of decline.

Why are Americans paying down credit card debt?

Consumer debt reduction service Debtmerica, which uses negotiated debt settlement to help people shrink debt, suggested declines are less a reflection of people paying down their debt than a sign of credit card companies restricting credit access.

Atlanta Journal-Constitution personal finance writer Henry Unger said the latest statistics are sign that Americans are focused more on reducing personal debt. Unger noted similar debt-payment findings from Atlanta-based credit counseling nonprofit CredAbility showing that consumers repaid a record $122 million through its program in 2010, which was a 3 percent increase from 2009. So far in 2011, payments are up 9.5 percent, CredAbility said.

Consumer confidence rising, comScore says

Virginia-based comScore, a company that specializes in measuring consumer behavior on websites and mobile applications, released a report in April showing that one in three consumers feel more confident about the economy. One in five has shopped around online for the best credit cards, comScore said. About 40 percent of those surveyed told comScore that credit cards with low rates were their top priority while 28 percent were looking for a card with no annual fee. Shopping and credit card applications were expected to increase through 2011, the company said.

What consumers want from credit cards

Increasingly, consumers are hungry for rewards. Thirteen percent of the consumers in comScore's survey wanted rewards, and the credit card rewards they wanted more than any other was cash back, comScore said. Many credit card companies see rewards programs as one of the best ways to convince shoppers to buy stuff with their credit cards rather than using cash or a debit card.

So it wasn't much of a surprise when, just eight days after comScore released its credit card report, American Express and Citi announced significant new additions to their credit card rewards programs.

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