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Less defaulting, late pay on credit cards

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TEXT OF INTERVIEW

BILL RADKE: Americans are paying off their cards. According to regulatory reports released by the major credit card companies, fewer customers are defaulting or making late payments. Here to talk about the economics behind the numbers live from WHYY in Philadelphia, Marketplace’s Gregory Warner. Hi Gregory.

GREGORY WARNER: Hi.

RADKE: What are the major credit card companies saying about their customers’ habits?

WARNER: They’re saying two things. One is the rate of late payments is down. That’s been trending down all year. Also this year, the rate of defaults are down. That’s when you haven’t paid in six months and the bank cancels your card and writes you off as a loss. Now part of this is seasonal — the last of the tax refund checks get cashed, people pay off their cards before we ride that long slope down toward Christmas and holiday shopping. But this is more than the usual mid-summer bump.

RADKE: So late payments and defaults down, does that mean that people are paying off their cards on time?

WARNER: Well, it means first of all that the number of people who have credit cards has shrunk. Defaults peaked in January through March of this year — about one in every 10 cardholders got dumped off the books. At the same time, credit card companies have gotten more skittish about who they mail the new card offer letters to. But yes, those customers who remain are reducing their debt, credit card debt most of all and they’re also spending a lot less.

RADKE: Yeah, so what does the reduced debt and spending mean for the card industry?

WARNER: Well these companies have been in retreat since 2008. Burned by a lot of non-payments. And now they may be ready to go nosing after customers again. Because obviously the more we spend, the more they earn in fees. They want us to be responsible, but you know, not too responsible.

RADKE: Right. Marketplace’s Gregory Warner, thank you.

WARNER: Thanks, Bill.

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