Credit card delinquency rate declines
November 20, 2013
• Q3 sees a drop of 14 basis points year over year
• “Consumers continue to deleverage”
Both the credit card delinquency rate (the ratio of borrowers 90 days or more delinquent on their general purpose credit cards) and the average credit card debt per borrower dropped on a yearly basis during the third quarter, according to figures compiled by credit reporting company TransUnion LLC.
The credit card delinquency rate dropped to 1.36 percent in Q3 2013, down 14 basis points from the 1.50 percent reading in Q3 2012. On a quarterly basis, the credit card delinquency rate experienced a seasonal increase from 1.27 percent in Q2 2013.
Credit card debt per borrower declined 1.3 percent over the past year to $5,235 in Q3 2013. Quarter over quarter, credit card debt essentially remained flat, increasing by only nine dollars.
"While consumer credit card delinquencies increased on a quarterly basis, they continued an overall trend of strong performance as evidenced by the yearly decline," says Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "Our data show that consumers continue to deleverage, with balances dropping in the past year and remaining near historical lows.”
He says that could open up marketing opportunities for credit card lenders.
Every state experienced either a decline or had their credit card delinquency rates remain flat between Q3 2012 and Q3 2013. The largest delinquency declines occurred in Massachusetts, West Virginia and Washington. All but two states saw their average credit card balances drop on a yearly basis, and the two states with increases -- Rhode Island and Vermont -- experienced only minimal rises.
TransUnion says Americans had 334.23 million credit card accounts as of Q3 2013, up from 327.69 million in Q3 2012, although this count was as high as 408.39 million in Q3 2008.
Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 11.05 million in Q2 2013, up from 10.41 million in Q2 2012. “Though there appears to be more extension of credit card credit, this number pales in comparison to data observed six years ago when there were 17.74 million new account originations in the quarter,” the company’s report says.
TransUnion's latest credit card report also found that the non-prime population (those consumers with a credit score lower than 700) continues to represent a smaller portion of all credit card loans at 29.06 percent in Q3 2013, down from 29.82 percent in the same period last year.
"Both the demand for and the supply of credit cards appears to be rising. It's a good trend for consumers and lenders alike, particularly as delinquency rates remain low," says Mr. Becker. "Yet despite low delinquency numbers, card lenders have remained cautious in their underwriting, as can be seen by the differences in originations from the recent past in terms of both overall volume and the portion of new cards going to non-prime consumers."
TransUnion is forecasting consumer delinquencies to rise in the fourth quarter to around 1.48 percent because of seasonality associated with holiday spending. "Credit card delinquencies typically rise in the second half of the year, so this is not worrisome," says Mr. Becker.
TransUnion's forecast is based on various economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and others. The forecast would change if there were unanticipated shocks to the economy.