Credit card delinquency rates, balances rise in Third Quarter

CHICAGO, ILL.
November 19, 2012 4:39am
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•  Carried an average balance of just under $5,000

•  “Credit card delinquencies are following a pattern”


Borrowers who are 90 or more days past due on their credit cards increased slightly in the third quarter, according to a report Monday from credit reporting company TransUnion LLC.

The national credit card delinquency rate edged up to 0.75 percent from 0.71 percent a year earlier. The delinquency rate had been 0.63 percent in Q2 2012, a seasonal low.

Average credit card debt per borrower also increased on a yearly basis by 4.91 percent, rising to $4,996 in Q3 2012 from $4,762 in Q3 2011, according to the company’s figures. On a quarterly basis, average credit card debt was up 0.50 percent relative to Q2.

"Credit card delinquencies are following a pattern similar to what we observed in 2011, with declines in the first two quarters of the year followed by an increase in the third," says Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "That seasonal consistency is encouraging. Credit card debt trends in 2012 also are mirroring 2011, with a decrease in the first quarter followed by two increases over the next six months. With both delinquencies and debt levels remaining quite low relative to historical norms, we are confident in the continued stability of credit card usage patterns in the short term."

New credit card originations grew 3.14 percent in Q2 2012 relative to Q2 2011, the report says. The share of non-prime, higher-risk originations (with a TransUnion credit score lower than 700 on a scale of 501-990) was 29.55 percent in the second quarter of the year, slightly higher than one year ago (29.28 percent in Q2 2011), and much higher than the 23.86 percent observed in Q2 2010. Credit card originations are analyzed one quarter in arrears, to account for the reporting lag of new accounts.

"Non-prime borrowers continue to gain more access to credit. In conjunction with the growth in the overall number of card originations in the last few years, it means that the credit card pie is bigger, and non-prime consumers are getting a bigger slice of that pie," says Mr. Becker. "It is possible that the slight increase in delinquencies year over year can be attributed in part to the increased share among non-prime borrowers of new accounts, but even so these delinquency numbers are not a cause for concern."

Thirty-six states saw increases in their credit card delinquency rates year over year, while nine states and the District of Columbia saw decreases. No changes were observed in five states. California and Nevada, two states hardest hit by the recession, continued to see decreases in their card delinquency rates, says TransUnion.


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