US credit card debt drops to lowest level in the last 8 years

The amount that consumers owed on their credit cards in the second quarter of this year dropped to the lowest level in the last eight years. This is because the credit card holders are continuing paying off their debts in this uncertain economy. They are seeking help of debt relief options such as debt consolidation programs and debt counseling. The average combined debt for bank issued credit cards have fallen to $4,951 but now it has fallen to more than 13% from $5719 in the period a year ago, according to the credit reporting agency TransUnion.

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TransUnion said that this was the first three month period when the level of debt fell below $5000 since the first quarter 2002. Credit card debt remained highest in Alaska which amounted to $7148. Twenty two states recorded debt even higher than the national average. Residents of Alabama have taken recourse to debt consolidation programs and managed to pay off debt even during the time of economic recession. This has dropped their average balance to $4753.

More and more borrowers in the US started making payments on time. The rate of cardholders who had passed their due dates by 90 days or more fell to 0.92% in the second quarter from 1.17% last year. This was the first time when the delinquency rate has been below 1% since the second quarter of 2007 before the recession. An eminent spokesperson of the TransUnion credit agency has said that the rate generally keeps on fluctuating during the year but there is an evident improvement in the way the consumers are handling their finances and paying off their debts on time. This shows that the consumers are working to make sure that their credit ratings do not hurt.

This concern reflects several economic factors of the US. It can be from the fear of unemployment to the fact that the collapsed housing market means that it’s harder to cash in on home equity when monetary conditions gets tight. You can’t buy groceries with the equity on your home any more.

Reflecting the states hardest hit economies by the housing crisis, the delinquency rate was the highest in Nevada at 1.5 % of the cardholders, followed by Florida with 1.24%, Arizona 1.11% and California at 1.08%. The lowest delinquency rates remained in North Dakota at 0.54% and South Dakota at 0.55%. Experts are of this opinion that the foreclosure crisis have helped to improve the timeliness of credit card payments and balances. The debt consolidation programs are also helping them pay off debts in affordable monthly payments.

TransUnion is predicting that the national delinquency rate will remain below 1% for the rest of the year. However on the high end the Nevada rate is forecasted to go up to 1.65%.