Credit card users are so focused on keeping their accounts in good standing that they've driven the rate of late payments down to its lowest level in 17 years.
The national credit card delinquency rate, or rate of payments 90 days or more past due, fell to 0.60 percent in the second quarter, down from 0.92 percent a year ago. That's the lowest rate since 1994, according to credit reporting agency TransUnion.
Delinquencies were expected to drop, but the improvement in that April to June period was faster than forecast.
And the improved payment habits came despite increased use of credit cards, based on quarterly data reported by banks that issue Visa and Mastercard-branded cards and data from American Express Co. and Discover Financial Corp.
TransUnion also saw higher card use, reflected in a slight uptick in the amount of debt card users carried during the quarter. The average combined total debt for all major credit cards increased by $20 from the first three months of the year, to $4,699 per borrower. Even so, that amount is down more than 5 percent from the $4,951 average in the second quarter of 2010, and is 16 percent lower than the peak average debt of $5,575 in the first quarter of 2009.
The overall improvements stem from a variety of factors, said Chet Wiermanski, global chief scientist for TransUnion's financial services business.
"Not only do we have consumers that are using their debt more responsible and taking out less debt, they've also cut back on the number of the cards they carry," he said.
Also contributing is the fact that banks have tightened their standards for approving card applications. After writing off record levels of uncollectible debt in recent years, most banks won't issue cards to applicants with low credit scores. They have also cut back credit limits on existing cards, making it harder for individuals to run up huge balances.
And Wiermanski noted that debit card use continues to rise, which reflects more cautious spending by consumers.
TransUnion expects the delinquency rate to continue drifting down for the rest of this year, but didn't offer a specific projection. "It's hard to forecast where this is going when you've reached a historical low," Wiermanski said. "Because you're in uncharted waters."