Credit card debt looks better than it is

The latest numbers issued by the Federal Reserve Board and the American Bankers Association with regard to consumer credit may seem encouraging to some. Consumer credit has slid in each of the last 20 months, and delinquency rates have declined below 15-year averages.

While that might all seem like good news, it’s not. According to the Wall Street Journal, a deeper look at those numbers – which seem like a positive step for the economy on the surface – will reveal an unfortunate truth: fewer Americans can pay their bills, and credit card companies are simply writing them off.

The report, citing numbers from the Fed and the Federal Deposit Insurance Corporation, said that of the $19.5 billion by which credit card debt declined in the first quarter of 2010, $18.7 billion was written off as uncollectable by credit card companies.

The latest report from the Federal Reserve board said that revolving credit, which is typically associated with credit card debt, declined by $5.4 billion from May to June, but consumers won’t know how much of that was written off until the FDIC’s quarterly report on charge offs is released next month.