Credit Card Debt Declining
According to the Federal Reserve, consumer credit card balances saw the largest dollar value drop since records began in 1968 and the biggest percentage drop of 18.5% since December 1974.
The Federal Reserves monthly G-19 Report considers various components of consumer debt which include revolving debt, consisting mainly of credit card debt, and non- revolving debt, comprised mainly of personal loans. American consumer credit card debt was reported as $975.2 billion in September of 2008. Since then consumers have initiated a 14 month decline by eliminating $101.2 billion in credit card debt. This data revealed that nearly 54 million U.S. households currently holding credit card debt eliminated nearly $1,874 (individually) since September 2008.
Some Analyst say this trend could be evidence that suggest consumers are trying to reduce their total credit card debt or that lenders are being forced to write off more of their accounts due to high unemployment rates and foreclosure starts. Fitch Ratings recently reported that delinquencies of more than 60 days on credit card debt reached an all time high of 4.52% in December while charge offs, debt that lenders no longer expect to be repaid, hit 10.8% in December.
Fitch says that the challenging labor market continues to present problems for borrowers, with charge-offs set to retest their recent highs during the first half of this year. Michael Kon, a senior analyst for the global research firm Morningstar say’s, “The decline in balances shows that consumers are de-leveraging by borrowing less from credit card companies to fund their shopping,” The latest economic challenges have left consumers with the choice to continue increasing their credit card debt or make the necessary changes to become debt free.
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