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News of credit card debt not as good as numbers show.
The latest reports from the Federal Reserve Board and the American Bankers Association made the state of the U.S. economy look great. The Fed said credit card debt had declined sharply, by billions of dollars for almost all of the last 20 months. The ABA said the rate at which consumers were unable to pay their credit card bills on time was also dwindling. There was, it seemed, finally some good news for the nation’s economic recovery.

But that simply isn’t the case, according to a new report in the Wall Street Journal. The reason those numbers have declined so dramatically despite the ongoing recession is not because consumers are paying off more of their credit cards, but rather because lenders are writing more debt that they know they will never collect off their ledgers.

The evidence, the Journal says, is seen in the numbers for the first quarter of the year from the Federal Reserve Board and the Federal Deposit Insurance Corporation. While the Fed says that overall nationwide credit card debt was reduced by $19.5 billion in the first three months of the year, the FDIC’s numbers show that $18.7 billion of that – nearly 96 percent – was actually written off.

Many experts noted that the latest numbers from the ABA were surprising, given that fluctuations in delinquencies were often closely tied to those in unemployment numbers in the past, but that was not the case last month. Unemployment held steady at its high rate, while delinquencies declined, and this is a large part of the reason why.

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