Total outstanding credit card balances increased by 4.3 percent in the third quarter of 2014 from the third quarter of 2013, according to the latest Industry Insights Report from TransUnion. This signals the second consecutive quarter of significant annual growth and constitutes the highest growth rate observed since the fourth quarter of 2008, according to TransUnion.
Interestingly, according to a news release from TransUnion, this increase in total balances occurred while the average credit card debt per borrower remained unchanged. The average credit card debt increased only slightly from $5,239 in the third quarter of 2013 to $5,249 in the third quarter of 2014.
The combination of these findings indicates that the current momentum in total balances may be driven by new entrants to the credit card market, according to TransUnion. In fact, the number of consumers with access to a credit card increased by almost six million, to nearly 156 million, from the third quarter of 2013 to the third quarter of 2014.
At the same time, the national credit card delinquency rate (the ratio of borrowers 90 days or more delinquent on their general purpose credit cards) remained relatively steady in the last year, declining from 1.36 percent in the third quarter of 2013 to 1.34 percent in the third quarter of 2014. The TransUnion report shows a quarterly increase in both the credit card delinquency rate and average credit card debt per consumer, which are believed to be reflective of seasonal effects.
The data provided are gathered from TransUnion's proprietary Industry Insights Report, a quarterly overview summarizing data, trends and perspectives on the US consumer lending industry.
"Seeing the highest rate of growth in credit card balances in the last six years in such a low delinquency environment is an encouraging sign for the card industry," said Toni Guitart, director of research and consulting in TransUnion's financial services business unit. "The combination of a stable delinquency environment across consumer segments and significant amounts of new entrants in the card market, point to a positive momentum dynamic that has not been experienced since before the Great Recession."
TransUnion reported 354.79 million credit card accounts as of the third quarter of 2014, up from 333.72 million in the third quarter of 2013. Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased 22.15 percent to 13.51 million in the second quarter of 2014, up from 11.06 million in the second quarter of 2013.
"While more non-prime and subprime consumers are receiving credit cards, we have not seen a major impact on the overall delinquency rate," Guitart said. "We will continue to monitor this situation as more subprime lending in the credit card space is generally followed by an uptick in delinquency rates."
MEMPHIS, Tenn. From credit cards and auto financing to mortgages and student loans, debt can pile up quite quickly. Paying it off, as many know, doesnt always happen as fast.
I started getting credit card debt at about the age of 18, Memphis resident Latisha Styles said.
By the time Styles graduated from college, shed racked up more than $20,000 in credit card debt alone.
Fresh out of school with a finance degree, but in the midst of the recession, Styles found herself unemployed and unable to pay her bills.
I just kind of let the credit cards fall by the wayside and unfortunately it hurt my credit score, it hurt my personal self-esteem, she said.
Sound familiar? Styles has a story like so many, but the good news is, hers has a happy ending.
She paid off every dime of her debt in three years.
Styles said, It made me feel triumphant that I actually set a goal and followed through, and not only that, its a huge weight lifted off my shoulders!
Want to dump your debt? Heres a three-step plan to be debt free in 24 months.
#1 Prioritize your debt
WREG spoke with Bankrate.com Senior Financial Analyst Greg McBride.
He said, If you want to focus on getting out of debt, start by listing all of you debts and then prioritizing them ideally from highest rate to lowest.
McBride says once that first item is paid off, funnel the extra cash to the next debt.
Speaking of a list, Styles took it a step further by literally setting a date to be debt free.
She said, Setting that date and then telling everyone that I had set that date really helped.
#2 Watch expenses
Experts say budgeting is key to getting out of debt.
McBride explained how it does two important things: One, itll give you a good idea of where your money is going so you can find opportunities to cut back and save and funnel more money towards debt repayment, but it also forces you to live within your means.
Styles went on what she calls a cash-only diet, which meant no credit card swiping at all.
When I had credit, I was spending about $1.20 to $1.30 for every dollar I made and so it was really important for me to pull back and say, this is how much you have and this is how much you can spend, Styles said.
Websites and apps like Mint.com, Good Budget and Ready for Zero can help track progress.
Most bank sites offer budgeting tools, too.
Experts say this must become a habit, even after youre debt free.
#3 Be ready to sacrifice
McBride said paying down debt often means making difficult choices.
Sometimes this is going to mean doing things that are painful like taking a second job or drastically cutting expenses so that you can create the money to really accelerate that debt repayment, he said.
Styles is fairly young, so she had a little help by bunking with family for a while. At the same time, though, she turned her hobby into cash.
She now runs a personal finance blog called Young Finances thats aimed at millennials.
If you think about it, every journey starts with a small step. So, its all about sitting down, thinking about how much debt do I have, when do I want to pay if off and making it realistic, she said.
Styles says part of being realistic was setting a goal that was attainable. This meant not completely depriving herself of things she liked to do. So instead, she set aside $50 in her monthly budget for fun money when she was paying down her debt.
She now takes the same approach as shes saving for the future. That fun money has become a savings stash for travel.
Styles used a credit counseling agency to help pay off her debt. They contacted her creditors, arranged fee concessions, and in most cases got her interest rates to zero percent.
If you still have good credit and are paying bills on time, you can negotiate for lower rates on your own. This of course frees up more cash to pay down that debt sooner.
Bankrate.com Debt Payoff Calculator
You know how much I hate credit card debt, given the astronomical interest rates you are stuck paying. Although the average is around 14 percent, I know plenty of you pay more than 20 percent interest. And next year could be even more expensive for anyone carrying credit card debt.
As you better know by now, the interest you are charged on an unpaid credit card balance is tied to any movement in whatever benchmark index or rate the card issuer uses. Many credit cards use the prime rate (the lowest rate of interest at which banks lend money) as their benchmark. Since December 2008, the prime rate has been stuck at 3.25 percent.
Thats all about to change.
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