DROP IN CREDIT CARD DEFAULTS – A POTENTIAL RISE IN THE NUMBER OF CREDIT-INACTIVE CONSUMERS

Amidst all the negative financial news of the surging credit card debt in the US and the constant debates on the raising of the debt ceiling, here’s something positive that can help you breathe a sigh of relief. According to recent reports, not many Americans are falling back on their monthly credit card bills by more than 90 days. Studies released by TransUnion suggest that the national credit card default rate has dropped to 0.82% in 2010’s last quarter, a drop of almost 33% since 2009. With such rates of credit card delinquency, most people refrained from seeking help of the credit consolidation options as they could well manage their rising debt burden.

More and more consumers are trying their best to reduce their credit card debt and stay current on all their monthly financial obligations. The average total credit card debt per user had dropped by 5.9% or by $287 to $4680 in the very first quarter of 2011 from a staggeringly high amount of $4966 in the last quarter of 2010. TransUnion has also mentioned in a statement that the most recent average was the lowest since the average amounts that was recorded in 2000 and considerably lower than the first quarter of 2009, during the US economic recession.

The number of credit-inactive consumers – Are they growing?

Recent reports say that nowadays most Americans are no longer using bank credit cards and in 2010, 70 million consumers did not use a bank-issued general purpose credit card. However, to add to this positive financial news in the US, it has also been noticed that during the course of 1 year, 8 million additional customers joined this rank of credit-inactive consumers.

There are some consumers who have started loathing the plastics and are avoiding all kinds of high interest debt. The national average credit card debt per borrower increased up to 0.29% but dropped by 11.54%, as compared to the third-quarter in 2010. Alaska was the state with the highest average for credit card obligations per borrower with $7260 of debt.

A credit-free lifestyle – Are there any benefits?

Either it is out of necessity or out of anxiety, that most Americans are reducing their dependence on credit cards. Since the financial crisis, use of revolving credit such a home equity line of credit and credit cards is on a decline. Have a look at the benefits of a credit-free lifestyle.

  • You don’t need to pay interest: When you’ve incurred credit card debt, you have to pay interest rate on it and therefore, a large portion of your hard-earned dollars goes towards paying someone else. If you stay on cash, you’ll no longer require paying someone else and therefore you’ll be able to save more money.
  • You can stay debt free: Not being much dependent on credit cards will help you weather poor economic times. When the economy does not go well, being debt free can make it easier to stay financially solvent as you need not use scarce resources to pay off debt.
  • You can track your pennies: Perhaps the biggest benefit of a cash-free lifestyle is that you will be able to save enough money and keep a track on your penny. Since each penny will be draining from your wallet, you can easily track them and spend them accordingly.

Are you trying to avoid all your credit cards and trying to pay off credit card debt by getting help from credit consolidation options? If answered yes, make sure you take the right steps and get back on track as soon as possible and lead a debt free life.