By Pallavi Gogoi

After years of living beyond their means, U.S. consumers hit a hard wall of reality in the last 2 1/2 years. Hurt by massive job cuts and a free fall in home prices, many stopped paying their credit card bills and defaulted on their mortgages.

Now, while consumers may not be rushing out to go shopping yet, there are signs that they are making more of an effort to catch up with their debt payments. Recent third-quarter results from banks that write a majority of the USA's loans show fewer consumers have been late on their credit card and mortgage payments.

In the third quarter, Bank of America saw a $146 million drop in home equity loans on which customers were more than 90 days late in payments . "(It's) the first decrease since the start of this credit cycle," says Chief Financial Officer Joe Price. At Wells Fargo, the loss rate on its credit card portfolio fell to 10.9% from 11.6% of loans.

The number of people filing for jobless benefits has dwindled, and signs of housing prices stabilizing are likely giving consumers some hope, analysts say. But Sara Johnson, an economist at IHS Global Insight, doesn't expect things to get better until 2010, when she predicts the unemployment rate will peak at over 10%, vs. 9.8% now. Still, she admits there are favorable signs. "We're at an inflection point -- delinquencies are a measure of households' financial stress, and perhaps the worst is over," she says.

All the banks continued to record large loan losses and have set aside billions of dollars for more unpaid bills in the months ahead. But executives take comfort in the fact that those numbers are starting to level off.

"There seems to be stability in the environment in terms of consumer spending ... that could be forming the base of a recovery," says Jamie Dimon, CEO of JPMorgan Chase, where loan payments late by over 90 days in the third quarter were down to 2.8%, compared with 3.3% of total loans in the second quarter.

Brian Foley, an analyst at Goldman Sachs, says that a slowing in the unemployment rate holds the key to stabilization. "As new jobless claims start to slow, there will be fewer people with payment issues," he says.

The stock market's run-up since March is also helping lift spirits, especially for some of the more affluent consumers, who could be the first to open their wallets. American Express, a barometer of higher-end household spending, saw a drop in its 30-day delinquency rate to 4.1% from 4.4%. "The trends in card member spending are encouraging, and there are signs that the recession may be approaching an end," CEO Kenneth Chenault says. (c) Copyright 2009 USA TODAY, a division of Gannett Co. Inc.