Americans Digging Further Out of Debt

A new report shows that the number of Americans delinquent on bankcards is at an 18-year low.


Americans are slowly moving away from bank card delinquency.

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Another sign that American consumers are digging themselves out of debt: the American Bankers Association reported Tuesday that bank card delinquencies hit an 18-year low in the fourth quarter of 2012.

The trade group found that in the fourth quarter, 2.47 percent of accounts were delinquent, meaning that payments on those accounts were 30 days or more overdue. That is nearly 40 percent below the 15-year average delinquency rate of 3.87 percent.

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American consumers have slowly unwound their way from bank card delinquency since the recession. ABA data show that delinquencies on credit cards provided by banks hit a high of 5.01 percent in mid-2009 and have dropped off precipitously since then.

One economist at ABA believes consumers are getting their finances in order to remain prepared against potential future financial troubles.

"Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base," said ABA Chief Economist James Chessen in a statement accompanying the release. He adds that while this may mean less spending and growth in the short run, it could mean greater economic and financial stability in the longer term.

It's not just bank card delinquencies that are down; as of late 2009, nearly 12 percent of all Americans' debt balances were delinquent, according to the New York Federal Reserve Bank. Today, that share is down to 8.6 percent. Indeed, Americans have been deleveraging slowly but steadily over the last few years. Data from the New York Fed show that total consumer debt has fallen from a high of $12.7 trillion in late 2008 to around $11.3 trillion at the end of 2012. Declines in mortgage debt, which make up 71 percent of that debt, led the way.

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However, the future for Americans in debt isn't entirely rosy. Some forms of debt have not been shrinking. Student loans are perhaps most notable, with those balances having nearly doubled in the last five years, from $548 billion in late 2007 to nearly $1 trillion at the end of 2012. Delinquencies on student loan debt have also skyrocketed while delinquencies on other types of accounts have held steady or declined.

In addition, looming economic uncertainty could stop the downward trend in delinquencies and debt. Cutbacks and furloughs due to sequestration and smaller paychecks due to higher payroll taxes are just two factors that could cause financial troubles for American consumers in the coming months. The latest measure of consumer confidence form the Conference Board showed the index slipping by 8.3 points in February, which may signal that Americans had less money to spend—and perhaps racked up more debt—in the first quarter.

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