Despite very high unemployment and plummeting home values, credit card delinquencies fell to an 8-year low in the first quarter of 2010, that is according to the American Bankers Association. And for the first time since 2002, the number of credit card accounts that were past due by 30 days or more, were less than 4% of the total number of bank accounts.
ABA Chief Economist James Chessen suggests this is happening because consumers are doing a much better job managing their finances, spending and borrowing less. We think that the real reason behind the nice numbers is the mere fact that the number of strategic defaulters has increased to the point it became really noticeable. Such defaulters choose stop paying their mortgages while they still can afford paying as well as property taxes and/or association fees, yet manage to live in their homes for free for months and often years, since banks are so overwhelmed with the shear quantity of foreclosures and short sales, they simply have no man power to process all such cases and evict people from homes with delinquent mortgages. So these homeowners now have a ton of money that often goes on paying credit card bills.