The newest data is in and it shows the percent of charge-offs, delinquencies and defaults on credit cards is down.
We are overall doing a much better job at handling our credit cards. The overall numbers are the best they’ve been in at least 3 years. Mind you, we’re not back to where we were when the economy was roaring. But our balance sheets as individuals and families have improved even though our incomes might not have improved. The reality is that people in large numbers are charging less.
The total amount of debt that consumers are carrying on credit cards is at the lowest level since early last decade. That’s a big improvement in the number of outstanding dollars we have charged. And it represents a massive cultural shift after decades of taking on greater and greater debt. Once the music stopped and the economy hit a slump, that’s when bankruptcy, default and charge-offs spiked.
Today, some of the healing we’re seeing is that banks are not willing to make credit available to our fellow Americans. But overwhelmingly, it’s a personal choice people are making to create more breathing space in their own lives.
I know this is just anecdotal, but I get so happy when people tell me about how they’ve reduced debt in their lives. Just the other day I had somebody tell me about how they had $30,000 in credit card debt just 2 years ago. Today, they don’t have a single penny of debt.
Of course, you can’t do this overnight. It takes time. One key rule is that if you have a balance on a card, you can’t use that card.
Here’s another tip: On your billing statement, you’ll see a minimum box that says you’ll be in debt for 30 years (or some other outlandish number) if you only make minimum payments. But right below that, you’ll see another box that says if you pay just a little above the minimum each month, that 30 years shrinks to more like 3 or 4. Think about what you can do in life to make it 3 years, not 30.