Consumer Payment Card News

Building Balances

Monthly payment rates, the amount cardholders pay on their outstanding balances each month, continues to spiral down, falling below 18.50% for the first time since July 2005. The payment rate peaked in October of last year, reaching almost 21%. The higher payment rates were driven by new minimum payment standards that took effect last year. Moody’s recently reported that the payment rate among credit card-backed securities fell slightly to 17.72% in February, after posting a record-setting forty-two months of consecutive year-over-year improvement. Moody’s noted that the combination of higher interest rates and a cooling off of the real estate market diminished the attractiveness of “cash out” refinancing activity in which many borrowers reduced their more expensive credit card debt by drawing on the equity in their home — either by refinancing their mortgages or by accessing their home equity lines of credit.

Leave A Reply