More credit card payments coming in on time

Millions of consumers fundamentally changed their credit card borrowing habits during and in the wake of the recent economic downturn, and lenders have been reaping the rewards for more than a year. That trend continued in July.

Instances of delinquency and default continued to tumble again last month, just days after the credit bureau TransUnion reported second-quarter declines in seriously late payments, according to a report from Dow Jones Newswires. A number of the nation's largest credit card lenders reported lower delinquency and default rates as consumers continued to make more of their payments into their outstanding balances on time and in full.

Stats from major lenders
In the monthly filings made with the U.S. Securities and Exchange Commission, top card issuers including Discover Financial Services, Capital One, Bank of America and American Express all noted lower or stable rates of delinquency, and only Bank of America saw its default rate, when it writes off significantly late balances as being uncollectable, increase slightly.

Bank of America's default rate jumped very little, to 5.05 percent of balances from 5.04 percent, the report said. At the same time, its early stage delinquency rate slipped to 3.17 percent from 3.23 percent.

AmEx, meanwhile, reported that both its rates of late payments and charge offs held steady, at 1.2 and 2 percent, respectively, the report said. The lender typically has the lowest such rates among all its major competitors because it targets a more affluent customer base.

Discover, wasn't especially far behind American Express as far as its delinquency goes, with its rate slipping to 1.83 percent in July from June's 1.88 percent, the report said. And finally, Capital One also noticed a decline in late payments, as its rate fell to 3.09 percent from the previous 3.16 percent.

Expert reaction
The continued declines in this area took some experts by surprise, as there has been little in the way of improvements in the economy that would impact consumers' ability to make more consistent payments into their balances, the report said. Consumer habits for dealing with credit card debt have been improving for some time, despite the recent economic stall.

"Credit card losses are approaching historical lows despite high unemployment and weak income growth," Moody's said in a report, according to the news agency. "This suggests there is considerable room for easing standards and incentives for lenders to maximize their profits."

Lenders have already been loosening standards considerably in the last several months, opening new accounts to subprime borrowers who might not have had access to credit in the past, the report said. Ezra Becker, vice president of research and consulting for the financial-services unit at TransUnion, recently noted that because standards for credit card qualification have been so conservative in the past few years, this broadening could continue into the near future. However, he also noted that standards might never again be as loose as they were prior to the recession, when just about anyone could obtain some sort of credit card.

Can it continue?
Many analysts also believe that these trends might be able to continue for several more months at least, the report said. This may be especially true as consumers keeping a tighter wrap on their spending, due in part to the aforementioned lack of growth in employment or wages.

Ken Chenault, the chairman and chief executive officer for American Express, recently made a presentation to investors in which he stated that it's unlikely consumers will increase their desire to take on new debts in the near future, the report said. However, recent TransUnion statistics show that balances have grown over the last quarter, and borrowers opened 4 percent more credit cards than they did in the previous three-month period. It is important to note, though, that this may have been out of necessity as a result of those stalled economic indicators.

Experts have been saying for some time now that instances of delinquency and default cannot continue to fall month after month for nearly all major credit card lenders. As lending continues to broaden, it's believed that rates of both kinds of late accounts will begin to rise naturally. However, they will likely do so back toward historical averages, as both rates are now well below those points.

Late payments of any kind can take a significant toll on your credit score, and for this reason, it's important to make sure every bill is paid on time. However, your attempts to keep a clean credit standing shouldn't end there. You should also take the time to order a copy of your credit report and check it over closely for any unfair markings that may be having an adverse effect on your rating.