Card Delinquency Rate Falls In Third Quarter: TransUnion    
Industry News

Source: Collections & Credit Risk

Credit card delinquency rates continued to fall in the third quarter as consumers continued to pay down debt and higher-risk borrowers stopped using credit cards at all, according to a report from TransUnion.

The TransUnion study released Monday found that the delinquency rate on credit cards – defined as loans that are more than 90 days past due – fell to 0.83% in the third quarter, down from 1.1% in last year’s third quarter. TransUnion predicts that the delinquency rate could fall to 0.75% by the end of the year.

“The news remains good as consumers continue to show fiscal responsibility in paying down their credit card obligations,” said Ezra Becker, a vice president of research and consulting in TransUnion’s financial services business unit.

TransUnion estimates more than 8 million people stopped using bank-issued credit cards in the past year - joining 70 million other consumers without active, general-purpose credit cards in 2009. High-income users were just as likely to suspend credit-card use as low-income populations, as much of the decline pointed to cautious consumers trying to pay down debt. However, credit access may be part of the decline in use: many issuers reported tougher underwriting criteria despite the Fed’s recent survey indicating some loosening of standards this year, according to TransUnion., according to TransUnion.

Still, the fact people are cutting up credit cards and paying off debt doesn’t mean they aren’t spending. The drop in the number of cardholders has also been coupled with a declining savings rate as reported by the U.S. Commerce Department. TransUnion’s Becker says “this might lead one to infer that consumers are shifting their focus away from a pure savings mindset to one that may include increased non-credit spending, such as debit or checking transactions.”

Q3 2010 Credit Card Statistics

  • Incidence of credit card delinquency was highest in Nevada (1.28%), followed by Florida (1.09%) and Mississippi (1.06%). The lowest credit card delinquency rates were found in North Dakota (0.48%), South Dakota (0.53%) and Nebraska (0.56%).
  • Only two areas showed an increase in credit card delinquency -- the District of Columbia (19.7% increase) and Mississippi (1.92% increase). The two areas of the country with the largest quarter-over-quarter drop in delinquency were Alaska (-19.2%) and Nebraska (-17.6%).
  • National average credit card borrower debt (defined as the aggregate balance on all bank-issued credit cards for an individual bankcard borrower) edged upward for the first time in six quarters by 0.28% to $4,964 from the previous quarter's $4,951, but down 11.54% compared to the third quarter of 2009 ($5,612).
  • The highest state average credit card debt remained in Alaska at $7,159, followed by Hawaii at $5,716 and North Carolina at $5,640.
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