Between the first quarters of 2009 and 2010, consumers paid about $72 billion more into their credit card debt than what they spent on those accounts, according to a new study from the credit monitoring bureau TransUnion. This stands in stark contrast to the previous theory of many financial experts, which indicated charge offs were the primary reason for continual declines in debt levels.
"Charge-off is a more predominant driver of deleveraging among subprime consumers," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "Among prime consumers, paydown is the major factor. Although it sounds simple, this is critical insight for lenders: it allows them to better understand the preferences of various sub-segments of consumers and respond appropriately to each."
All of the nation's top credit card lenders have seen profits climb significantly in the last several months, as both more conscientious bill payments and previous defaults reduced the number of charge offs.