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Delinquent credit card payments fall to eight-year low

WASHINGTON — Late payments for bank-provided credit cards fell in the year’s first quarter to the lowest level in eight years, the American Bankers Association reported last week.

Bank-card delinquencies, reflecting card payments that are at least 30 days overdue, fell to 3.88 percent of all accounts in the first quarter — the lowest rate since the first quarter of 2002 — compared with 4.39 percent in the fourth quarter of 2009, according to ABA data.

The trade group also reported that an overall barometer of consumer loan delinquencies showed improvement.

The composite ratio, which tracks delinquencies in eight categories of so-called closed-end installment loans, fell to 2.98 percent of all accounts in the first quarter from 3.19 percent in the prior quarter.

“It’s far from a perfect score, but we are moving in the right direction, and that’s a hopeful sign,” said James Chessen, the ABA’s chief economist.

Job creation is the key to further improvement, he added.

“There is a very strong link between job loss and consumer credit delinquencies,” Chessen said. “We won’t see a sustained decline in delinquencies until new jobs are created in this economy.”

While delinquency rates could edge up or just remain flat, Chessen pointed to one encouraging sign: the rate of bank-card delinquencies is below the 15-year average of 3.93 percent. He noted that banks are also charging off losses, contributing to the decline in delinquency rates.

“Both consumers and banks are following a prudent course here by managing their finances and moving forward as best they can in a horribly weak economy,” Chessen said.

The composite ratio has declined for three consecutive quarters, with the first quarter’s 2.98 percent marking the lowest since the third quarter of 2008.