Fewer LI credit card users default in May, index shows

Fewer Long Island consumers were very late with their credit card payments in May, compared to May 2010, according to data from the Consumer Credit Default Indices created by Standard & Poor's and Experian.

The default index was down 23.5 percent from 2010 for Nassau and Suffolk counties. Any credit card payment not made within 180 days of the bill's due date is considered a default, according to S&P Indices.

The Long Island rate has trended below the national credit card default index from May 2010 until March of this year, when there was a 19.8 percent increase.

The rise could be due to stagnant wage and job growth and the weak housing market on Long Island once again catching up with consumers, said Pearl Kamer, chief economist for the Long Island Association.

The May figures were the latest available for Long Island.

Nationwide in May there was a 33.4 percent decrease in the credit card default index compared to May 2010.

In June figures that are available only nationally, a national composite index based on  first mortgages, second mortgages, bank cards and auto loans was 2.14 -- down 37.8 percent from last year. Individual default rates were down in each of the four categories.

The last time the composite consumer credit default index saw a month-over-month increase was in November 2010, and since then it has consistently decreased every month.

The lower default rates are a good sign for the economic recovery as Americans improve their financial situation, said David Blitzer, managing director and chairman of the index committee for S&P Indices.

Although more people are paying off their debts, it does not mean more money is being injected into the economy through lending. Michael Driscoll, a visiting business professor at Adelphi University, said it has become harder to secure loans for mortgages and cars, and that factor could also attribute to the decrease in default rates.

"I would be concerned that the overall pool of credit applicants is decreasing," he said.

But credit card spending is on the upswing as the Federal Reserve reported an increase in revolving credit in May. And the fact that people are paying off their bills could mean future spikes in consumer spending, Blitzer said.

"What we saw in May for the first time was a little bit of growth in the credit usage of bank cards," he said. "That says to me you've got some people out there who are beginning to feel more comfortable about the economy . . . and they're showing that confidence by spending a little more on their cards."