Fewer credit card defaults occurred in September, and the rate of mortgage default remained steady. While many Americans took this as a sign of changing times, these little changes might not be enough to mend our failing economy.
According to the Standard & Poor’s/Experian Consumer Credit Default Indices the default rate on credit cards issued by banks dropped down to 5.26 percent in August. It was at 5.64 just in July. For mortgages, the rate of default fell from 1.93 percent to 1.92 percent, for second mortgages the rate showed a slight increase from 1.27 percent to 1.25 percent.
Late payments and charge-offs jumped a little bit in August of last year, but have continued to decline since then.
The several major banks: Chase, Discover, Bank of America and American Express all saw smaller delinquency and default rates in August, according to data from Credit-Land.com, a credit card industry research company.
"The economy and the consumer satisfaction are on a rollercoaster ride," Arnold Taubman, a personal finance expert at Credit-Land.com said. “As a whole it seems that the market is optimistic about future rate decreases and increased consumer satisfaction.”
Decreased bank rates could indirectly be good for the economy. If consumers have to worry less about fees, they are more likely to purchase with freedom. But the lower rates seem to be advertised to consumers who have the better credit scores and aren’t necessarily good for the whole economy, but good for a few select groups.
In order for our economy to reach its previous peak, U.S. consumers need to spend more money. Consumer spending is about 70 percent of our GDP total. From July to August, consumer spending changed very little, according to data reported by the U.S. Commerce Department. The data also showed that retail sales increased from the previous year, this could be attributed to rising clothing costs and not increased consumer spending.
Analysts don’t have realistic expectations about the U.S. economy and don’t expect it to grow overnight. Across the board, analysts expect to see a change for the better in the U.S. economy in about two years.
“Banks have begun being more suspicious of lenders, their accounts and their credit histories. Because the banks fear another recession, they want to only lend credit to borrowers of the highest quality,” Taubman said.
According to the latest data found in the Federal Reserve Consumer Credit Report, revolving credit card balances are on the decline. From July 2010 to July 2011, credit card debt dropped 5.2 percent or $3.4 billion to $792.5 billion.