Fitch Ratings released new statistics this week that showed credit card defaults had dipped to 9.65 percent, the lowest rate in 16 months. Late payments for all major credit card providers showed a definitive improvement between June and July.
Although Americans seem to be getting a better hold on their debt, the charge-off index – the amount of debt paid considered uncollectable by the banks – remained 60 percent above its historical average of 5.88 percent. Banks write off loans when the borrower is more than 180 days late on payments.
“The trends are encouraging, but card defaults are still elevated historically and are expected to remain so,” said Fitch managing director Michael Dean. “Unemployment will continue to weigh on consumer credit quality throughout the rest of this year and well into 2011.”
Payments that were 60 or more days late fell to 3.76 percent in July from 3.86 percent in June as well, according to Fitch Ratings.
Consumers should repay their debt in a timely manner to avoid penalty fees and credit score damage. Keeping up with monthly credit card bills can improve a payment history over time.