Credit Card Debt, Delinquency Rates Keep Falling

Published December 15, 2009

The Federal Reserve in December released data showing credit card debt fell for the 13th consecutive month in October.

Revolving credit, most of which is credit card debt, decreased at an annual rate of 9.3 percent in October 2009. That represents a drop of $88 billion since October 2008, from $976.1 billion to $888.1 billion.

Credit card delinquency rates also are dropping. The delinquency rate, covering loans 30 days or more past due, was 1.10 percent in the third quarter of 2009 and is expected to fall to 1.07 percent by year’s end.

“The overall decrease of credit card balances is a very good sign for consumers,” said Bill Hardekopf, CEO of, a free, independent Web site that allows consumers to compare rates for the more than 1,000 credit cards offered in the United States. “Perhaps they have taken charge of their credit card and are paying down some of their debt.”

Possible Backlash
Consumer backlash also could be playing a role, Hardekopf says.

“Another factor seems to be [card users] are upset at the very high interest rates and fees that credit card issuers have put on their accounts” and are therefore using their cards less.

Hardekopf noted the National Retail Federation’s 2009 Holiday Consumer Intentions and Actions Survey showed 28.3 percent of holiday shoppers planned to use credit cards in 2009 compared to 31.5 percent of holiday shoppers in 2008, a 10 percent decrease. And nearly three of four credit card users said they plan to pay off their balance immediately to avoid interest charges.

Hardekopf said some of the decline in credit card use may be involuntary and “credit card issuers themselves may be responsible for much of this drop in revolving credit. Issuers have closed many credit card accounts and have tightened approval rates, making it harder for some consumers with marginal credit to qualify for a credit card. In addition, credit card issuers have cut the credit limits on many customers.”

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.