Credit Card Defaults

One would think that hard times such as we have been living through the past couple of years would lead to people borrowing beyond their means in an attempt to keep up their lifestyle. It's kind of heartening to read the latest report from the American Bankers Association, which finds that Americans are actually acting more responsibly with their credit cards.

According to the ABA, only 3.88 percent of all credit-card accounts are now more than 30 days past due. That's down from 4.39 percent in the fourth quarter of 2009. In fact, it's the lowest that figure has been since the first quarter of 2002. Imagine - throughout the bull market of the past decade, more people were delinquent on their credit cards than they are now.

Of course, there's another issue at play here: During the recession, thousands of credit-card holders went into what's called full defaults, where the cardholder is clearly going to be unable to pay off the balance, so the card issuer writes off the debt as a loss. While the lowering of the credit-card default rate is admirable, it is probably a bit wind-aided because full defaults have already cleared out many of the deadbeat accounts.