by Joseph Kenny | 03/19/09
It might be the last kind of news you expected to hear in the midst of the worldwide crisis that is shaking the financial world, but as the fourth quarter reports from last year are starting to be read and analyzed by the general public, a small silver lining can now be gleaned to stand out among the rolling masses of grey thunderheads that have typified the financial zeitgeist of the 2000s so far.
What good news could possibly come to the forefront in such a grim time? A surprising number of Americans are beginning to pay credit card debts on time. After more than a decade of gradually declining numbers of on-time payments, resulting in skyrocketing interest rates and unprecedented levels of bankruptcy declarations, the first signs of an upturn have now taken place.
Upon being elected, the new President of the United States, Barack Obama, had stated that in order to recover from the recession, the country would have to enter an "age of responsibility" wherein individuals were accountable for their expenditures, and handled credit maturely, realizing that it was money that would one day have to be paid back, rather than just treating it as a free loan that their descendents could deal with when the time came to do so. This sudden rise in the number of on-time payments to credit card companies may well mark the beginning of just such an era, but analysts warn that is merely the first step of many that must be taken before the dollar once again comes to hold more value than the paper on which it is printed.
The numbers that are coming in and delivering this shocking news are from the last three months of 2008. They represent an 11 percent decrease in the overall number of people who were three months or more behind on their credit card payments. Interpretations of these numbers have varied widely, but general consensus is that the repressed economy sparked a nationwide spirit of frugality and responsibility that is beginning to have positive effects. Customers are thought to have practiced restrained spending during the holiday months, a hypothesis that is borne out by examining the numbers reported from the retail and manufacturing industries during the same quarter.
In addition to on-time payments, it seems that the amount being added to balances has sharply decreased as well, a fact that is most likely directly correlated with the ability of consumers to actually make the payments themselves. During the holiday season, less than 2 percent was added to the balances of most consumer credit cards, is the report from TransUnion, who conducted a nationwide consumer credit tracking survey on the trend.
As the recession worsens, hope can be gleaned from this trend. In the analysis of your own finances, take some time to look for ways that you can cut your own spending to make certain that your credit card bills are paid on time. Doing so, while it might be painful now, is certain to pay off dividends in the long run as you avoid accruing massive interest that could compound your debt for many generations to come.