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Credit Card applications increasing; On-time payments up

Friday, August 17, 2012 at 9:48:16 AM

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Consumers are borrowing more on credit cards and improving their on-time payments.

Instances of consumers falling three months or more behind on their credit card payments dipped once again in the second quarter of the year while the average debt carried by borrowers nationwide surged, and new account origination crept up somewhat, according to the latest data from the credit monitoring bureau TransUnion. In all, instances of accounts 90 days or more behind on payments slipped to just 0.63 percent of all balances, down from 0.73 percent in the first quarter of the year, and the second-lowest delinquency rate observed by the company since the end of 1994.

Borrowers feeling more comfortable?

At the same time, the amount the average consumer borrowed rose nearly by $275 in the course of a year, the report said. At the end of the second quarter, borrowers nationwide owed an average of $4,971, up from $4,699 in the same period last year. However, that number is still well below the $5,719 seen in the second quarter of 2009, when the recession was just coming to an end.

Further, many consumers were able to open new accounts in the second quarter of the year, the report said. In all, new originations jumped about 4 percent, but part of that was driven by 26.1 percent of accounts being granted to those with bad credit. However, while that number was down from the 27 percent seen at the same time last year, it was up significantly from the 20.6 percent in 2010.

So what does this mean for you?

If you're like many Americans, you now place a great deal of importance on your credit cards, and may be looking to expand the number or types of accounts you have in your name. This will likely lead you to review a few credit card applications so that you can maximize the value you get from your everyday payment habits and find the best credit card for you and your unique financial situation.

For instance, the nationwide increase in the average consumer's balance might show that more Americans are now comfortable carrying some amount of debt from one month to the next. They might be able to save money on that habit by checking out credit card offers for accounts with a low interest rate, which will keep the amount added to their account for interest charges to a minimum.

But many consumers might also be keeping their balances very close to zero, which could help them improve their payment history by keeping their monthly bills down. For these borrowers, it may be a better idea to find a credit card for an account that carries no annual fee. With this kind of card, they would be able to keep their balance in check and not worry about being hit with a sometimes-sizable fee every year just for maintaining the account.

No annual fee cards are widely available so don't be discouraged if you have less than stellar credit. In fact, there are many credit card applications for fair credit and even credit cards for poor credit with fees as low a $3.00 a month.

Of course, whenever you're on the lookout for a new credit card, you should always do a bit of research into both your own finances and the various cards that might help you maximize your savings potential. The latter can be done by using a credit card search engine to narrow down available online credit card applications, which will in turn give you a better idea of your options going forward.

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