Credit card debt expected to grow this year

Though consumers attitudes toward using credit cards and carrying credit card debt from one month to the next have changed considerably since the recent economic downturn, analysts now say that improving economic conditions will be a boon to lenders throughout 2012.

Consumers' attitudes toward taking on credit card debt will likely continue to evolve again over the course of the year as the economy continues to improve and personal finances once again grow healthier, according to new data from Moody's Investors Service. During the recession, many Americans got more cautious about using these accounts to finance any purchases beyond those required in an emergency, but in the past few months, experts have seen those tendencies change somewhat to at least begin to resemble pre-recession borrowing. Now, consumers are happily using their cards to make all kinds of purchases once again, but are at least being cautious in not carrying any outstanding debt over from one month to the next.

Further, because card use is expanding once again, analysts believe that debts must logically follow, and it's believed that balances will grow somewhat before the end of the year, even as rates of delinquency and default continue to recede, the report said. In fact, it's expected that accounts, which fall so far behind on payments that lenders have to write them off as uncollectable, will slip another 15 or 20 percent this year to just 4.5 percent of all balances for the nation's six largest credit card lenders.

However, that's a significant step down in pace from the 40 percent seen last year, the report said. Charged off accounts totaled 5.5 percent of all balances at the end of 2011, and peaked at 11 percent in the first quarter of 2010. Overall, it's expected that the long-term average for charge offs will stand at about 4.7 percent, indicating that the record declines in these rates will bottom out at some point, as many experts have been predicting.

Borrowing to increase regardless of reformed habits

Moody's also projects that balances will expand, and this will likely be for two reasons. The first is that consumers are, again, simply spending more on their cards and that will necessarily lead to at least a slight uptick in balance growth. But at the same time, many of the nation's top six lenders are also expanding credit offerings to consumers who had previously been locked out of the borrowing system, and even that type of subprime lending isn't expected to significantly impact credit quality.

"Together with expected balance growth of about 5 percent, continued improvement in asset quality should lead to a significant increase in profitability this year, with pre-tax profits likely to go up by about 35 percent," said Curt Beaudouin of Moody's.

Consumers who want to begin using their credit cards more often these days may want to first check their credit reports to ensure that they are in good standings. Sometimes, unfair markings may have a negative effect on their credit scores.