| May 29, 2012

Credit card balances fall, but new credit rises

Credit card debt is cited as one of the many reasons some households are struggling financially. Some Americans who were hit hard by the national recession as well as those who were laid off and unable to find employment were forced to rely on credit cards to meet their day-to-day needs. As the economy slowly begins to improve, more consumers are focused on recovering their good credit standing and keeping their balances more manageable.

Households are working hard to manage their credit card debt more wisely and put themselves in a better financial situation, as evidenced by a new study. The National Consumer Credit Trends Report issued by Equifax reveals existing bank credit card balances as of April 2012 were 28 percent below their peak, falling to $531 billion in April from $730 billion in January 2009. In addition, available credit limits for retail credit cards also increased by $5 billion during the same period.

"The combination of increased available credit and more timely payments among card borrowers has led to the recent growth in card lending," said Equifax chief economist Amy Crews Cutts. "Consumers are starting to respond to increased credit availability both in cards and other tradelines, a signal of both their financial confidence and improving economic conditions. In turn, this increased consumer credit activity bodes well for U.S. economic growth through the second half of 2012."

In the years following the recession, more consumers took actions to improve their overall credit condition and avoid the types of spending patterns and behaviors that led to significant debt. Enrollment in credit counseling programs spiked and many individuals sought out more affordable credit cards with lower rates and fees. However, there are still several other steps consumers can take to win their battle against high credit card balances.

Few individuals are aware that their credit card rates are negotiable and many lenders will agree to lower their interest rates if they ask. In some cases, adults will need to be persistent and speak with a manager, but few issuers want to lose business and are flexible when it comes to working with customers. In addition, consumers who are overburdened by credit card balances can consider transferring a balance to a card with a zero percent introductory rate. However, it's important to choose a card that provides a low rate for a long period of time that allows consumers to pay off their balance in full before the standard interest rate kicks in.

Lastly, consumers can speak with a certified credit counselor, who can provide budgeting resources, repayment guidance and personal finance tools to help adults create a personalized credit management program.

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