Credit Card Debt and Accounts Still Declining

While the number of credit cards being issued continues to drop, so does the amount of debt those dwindling cardholders continue to carry.

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A new report released last week from the Federal Reserve of New York shows that the number of open credit card accounts continued to decline during the third quarter of this year. The number of open credit card accounts has dropped 24 percent from its peak in the second quarter of 2008.

“The Quarterly Report on Debt and Credit” shows that approximately 217 million accounts were closed during the four quarters that ended September 30. Meanwhile, only 158 million new accounts were opened during this same time.

In addition, the Federal Reserve’s new monthly report on consumer borrowing shows that revolving credit – the majority of which is credit card debt – dropped for a record 25th consecutive month, falling by an annual rate of $8.3 billion, or 12.1 percent.

While these numbers appear ominous for the credit card industry, there are some positive signs for issuers…

  1. The decline in open credit card accounts was much smaller during the third quarter of the year. The total number of open credit card accounts dropped from 381 million to 378 million.
  2. The number of new credit account inquiries increased for the second quarter in a row, indicating that consumer demand is increasing for credit cards and more people are submitting credit card applications. According to The New York Times, there were 160.8 million inquiries in the six months through the end of September, up from 149.7 million in the six months through June 30. Even with the improvement, this is the lowest number of credit inquiries for any 12-month period since the Fed began counting the numbers in 2000.
  3. Total household delinquency rates may also show signs of recovery. Total household delinquency rates declined for the second consecutive quarter. As of September 30, 11.1 percent of outstanding debt was in some stage of delinquency. This is down from 11.4 percent on June 30, and 11.6 percent a year ago. Approximately $1.3 trillion of consumer debt is currently delinquent, down 8.2 percent from a year ago. About $928 billion is seriously delinquent (at least 90 days late or “severely derogatory”), down 4.6 percent from a year ago.

“Over the past two years, credit card issuers and cardholders have both aggressively reduced credit card debt. Issuers have lowered limits and closed accounts, while cardholders have reduced their usage, paid down their balances or defaulted on the account. These changes have restored a bit of stability to credit card lending. It remains to be seen if this stability leads to wise growth in credit card borrowing and lending,” says Bill Hardekopf, CEO of and author of The Credit Card Guidebook.

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