LOS ANGELES, Calif. – Americans cranked up their use of credit cards in the third quarter, racking up more debt than a year ago, while also being less diligent about making payments on time, an analysis of consumer-credit data shows.
The average credit card debt per borrower in the U.S. grew 4.9 per cent in the July-to-September period from a year earlier to $4,996, credit reporting agency TransUnion said Monday.
At the same time, the rate of credit card payments at least 90 days overdue hit 0.75 per cent, up from 0.71 per cent in the third quarter of last year, the firm said.
While higher, the late payment rate is rising from historically low levels. The lowest late payment rate on TransUnion records going back to the mid-1990s was 0.56 per cent, set in the third quarter of 1994. More recently, it was at 0.60 per cent in the second quarter of last year.
During the last recession, many Americans reined in spending in favour of paying off debt, particularly credit card balances. The housing downturn also prompted many homeowners to make paying their credit card accounts on time a priority at the expense of other financial obligations, such as their mortgage payments.
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And there are no indications that trend has changed, even with the slight uptick in the late payment rate, said Ezra Becker, vice-president at TransUnion’s financial services business unit.
“We definitely see consumers being more conservative in their spending and making every effort to pay down the balances and maintain the health of those card relationships,” he said.
Americans are also carrying higher card balances, though the third-quarter increase could be due to seasonal factors.
Cardholders tend to use their cards during the holidays at the end of the year and then pay down their balances in the spring. Similarly, many consumers will spend more in the summer and early fall on summer vacations and back-to-school shopping, Becker noted.
The pickup in credit card use also may reflect improved confidence in the economy on the part of consumers.
Consumer confidence increased steadily between July and September, as hiring improved, particularly in August and September. Employers added 171,000 jobs in October.