With the world economy on the mend, we're starting to get used to hearing good financial news. So far in 2013, home prices are on the rise and the stock market is doing well. It seems we're finally out of the (recessionary) woods.
Unfortunately, though, the economic downturn doesn't seem to have changed our spendthrift ways. The news about credit card spending for 2013 is in, and it's not all good: More of us are paying our credit cards late as the year draws to a close.
Late payments jump in the third quarter
TransUnion, one of the major credit reporting agencies in the U.S., reported recently that late payments on credit cards jumped between July and September. During that time, 1.36% of credit card users in the U.S. were 90 days or more overdue on credit card payments. This is an increase from the second quarter, when only 1.27% of credit card customers were 90 days past due.
Economists think back-to-school spending in the late summer and early fall is probably the reason for the jump in late payments. TransUnion predicts that past-due payments will make another jump in the fourth quarter of the year as people use plastic to buy holiday gifts that they can't afford to repay before the bill comes due. After all, if we're not budgeting for notebooks and pencils, we're probably not budgeting for Christmas presents or New Year's parties, either.
Good news, bad news?
While the news that Americans are falling behind on their credit card payments may seem like completely bad news, the numbers from the third quarter of 2013 aren't as dire as they seem. Even though we did worse with paying our credit cards on time at the end of the summer than how we did at the beginning, compared with July through August of 2012, we've actually made some improvements.
In the third quarter of 2012, Americans were past due by at least 90 days on their credit cards at a rate of 1.5%, which is much higher than the 1.36% overdue rate we're looking at right now. What's more, overall delinquency levels are currently at their second-lowest rates since TransUnion started keeping records in 2007.
Avoid paying late if you can
Despite the mixed news about late payments on credit cards in 2013, it's important to take steps to avoid paying your own credit card late if you can. Failing to make a credit card payment on time can take a toll on your credit score; 35% of your score comes from your history of making bill payments by their due dates. This means that falling behind can really pinch.
To steer clear of making this mistake, consider the following tips:
- Track your spending carefully. This way, you'll be able to keep tabs on how much you'll owe at the end of the month and avoid charging more than you can pay off.
- In the event that you can't pay your credit card bill in full, be sure to make the minimum payment by the due date. It's not ideal, but at least you'll stay current.
- If you struggle with remembering to pay your credit card bill on time, set an alert on your phone or mark your calendar with your bill's due date. This way, it will be harder to forget.
- If you do end up forgetting to pay your bill by its due date, call your credit card company right away, apologize, and make the payment immediately. Being upfront with your card issuer is the best way to avoid late fees, and you might also be able to convince them not to report your late payment to the credit bureaus
The bottom line
Although late payments on credit cards are up in the second half of 2013, they're still low by historic standards. And regardless of current data, you should be taking steps to make sure you don't end up a statistic. Make it a priority to pay your credit card bill on time!
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