Average US credit card debt per borrower up in 3Q

LOS ANGELES — 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 percent 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 percent, up from 0.71 percent 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 percent, set in the third quarter of 1994. More recently, it was at 0.60 percent in the second quarter of last year.

During the last recession, many Americans reined in spending in favor 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.

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.

Another likely contributor to the rise in card balances is that banks have been issuing more cards to borrowers, including those with less-than-sterling credit.

Data on the number of new credit card accounts opened by consumers lags by a quarter, so the most recent figures that TransUnion reports are from the second quarter of this year.

The data show that the number of new cards issued by banks rose 3.1 percent in the second quarter from a year earlier, with more than a quarter of the cards going to consumers with a nonprime credit score, according to the VantageScore credit scale.

A nonprime score is anything below a 700 on the scale, which ranges from 990 to 501. The lower the score, the more of a credit risk a borrower represents to banks.

All told, 29.6 percent of the cards issued by lenders in the third quarter went to nonprime borrowers.

“Lenders are absolutely issuing more credit in the nonprime space,” Becker said. “The size of the pie is bigger and nonprime consumers are getting a larger share of that pie.”

Banks have become more open to issuing credit cards to higher-risk borrowers due to tight competition for top-rated consumers, many of whom are not signing up for additional credit. That leaves the crop of borrowers with some blemishes in their credit history.

Even so, TransUnion forecasts that severe delinquency rates on cards will remain near current low levels in the fourth quarter.

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