Iowans' average credit card debt lowest in nation, but rising

A new report shows Iowans ended 2010 with the lowest average credit card debt in the nation, but that figure continues to rise.

A Chicago-based TransUnion analysis of trends in the credit card industry found that Iowans had average credit card debt of $3,915 in the fourth quarter of 2010, up 2.84 percent from $3,807 in the third quarter of 2010, according to its analysis ending Dec. 31. Trailing Iowa were North Dakota residents with average credit card debt of $4,181.

Iowa posted the second-largest increase in average credit card debt from the third quarter, second only to the District of Columbia at 4.17 percent. Iowans' average credit card debt hit a low of $3,792 at the end of the second quarter and has risen since that time.

The highest state average credit card debt remained in Alaska at $7,010, followed by North Carolina at $5,680 and Tennessee at $5,605.

The TransUnion report, issued Tuesday, revealed that the national credit card delinquency rate (the ratio of bank-issued card borrowers 90 days or more delinquent on one or more of their credit cards) decreased 0.82 percent in the fourth quarter of 2010, down almost 32 percent year over year.

Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit, said the fourth quarter of 2010 marked the second time since the recession officially ended in the summer of 2009 that average consumer credit card balances did not decline.

“However, on a year over year basis, these balances still show declines, but at a smaller rate when compared to recent history,” Becker said. ”It is encouraging to see a return to historical seasonality. Card balances would be expected to increase in the fourth quarter due to holiday spending.”

Although TransUnion does not expect large increases in average credit card balances in the next couple of quarters due to the continuing high unemployment rates and the relatively high savings rate (now at 5.4 percent), Becker said the news is promising.

“Taken together, the recent news on rising consumer spending, increased demand for durable goods, the drop in the personal savings rate, and increases in consumer confidence indicate that consumers may now be demonstrating a more optimistic view of their financial outlook,” Becker said. “It is a positive sign that consumers have more confidence in the increasing stability of the economy and of their own personal financial positions.”

With respect to the credit card delinquency rate, Becker said 2010 was an excellent year for consumers as they showed continuing fiscal responsibility in working to pay down their credit card debt.

“Even in the presence of falling home prices, the accumulation of negative real estate equity and high levels of unemployment, consumers still have been placing a premium on paying off their credit card obligations and maintaining the health of their card relationships,” he said. “Based on our current economic assumptions, TransUnion believes that the 90-day credit card delinquency rate will still be impacted by seasonal factors, but generally continue to drift downward toward 0.73 percent by the end of 2011.”