Credit card companies should be smiling after receiving word that consumer confidence is on the rise and spending has increased over the third quarter. As for the good-for-them, bad-for-you news, delinquencies have increased as well, which can sometimes mean more money for the banks. Heres a rundown of what the third-quarter reports mean for credit card companies and consumers.
From July to September of 2012, Americans pulled out their plastic more often at the checkout, which resulted in the average Americans credit card debt jumping by 4.9% and thats before the holiday season. Last year, most American borrowers owed their credit card issuers an average of $4,762 during the third quarter. This year, Americans have upped their buying game. The average user now owes $4,996.
Of course, more debt often means more late payments. TransUnion, a credit-reporting agency, found that delinquencies have been following the same trend that occurred during 2011: Americans paid their debt off on time during the first two quarters and slacked a little bit when it came to the third. That’s understandable. Summertime is for vacationing. It’s a time for spending. We’ll figure out what to do about our Visa cards later.
Despite the fluctuation in payments and delinquencies, credit card companies are giddy because Americans signed up for more cards during this fiscal year as well. During the second quarter, new card signups increased by 3.14%, and most new applicants were subprime users or Americans with inferior credit, which means they now hold a bigger piece of the credit pie.
Ezra Becker, TransUnions vice-president of research and consulting, believes that the upswing in delinquency rates is a possible result of giving more credit to non-prime users. Still, Becker remains confident. With both delinquencies and debt levels remaining quite low relative to historical norms, he has said, we are confident in the continued stability of credit card usage patterns in the short term.
So consumers, youve done your job right. Youre feeling confident in your spending ability, and youre showing it off. Here at the beginning of the holiday season, youre probably even gearing up to put yourself in more debt. Arent you? Thatll really give the card companies what they want. If the fiscal year ends like the third quarter did, credit card execs will be whistling a happy tune as they read their yearly reports. Theyre making more money, and delinquency rates seem to be reaching a historical low. As for consumers, keeping up with finances seems to be the new trend. With the holidays on their way, remember to keep your head above water when it comes to spending. Drowning in debt isnt the best way to start the new year.