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» U.S. Credit Card Delinquencies at All-time Low

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Credit Card Late Notice

Credit Card Late Notice

Delinquency rates for credit cards at U.S. commercial banks continue to drop for the second quarter of 2011 according to Federal Reserve data and Moody’s Credit Card Index. Delinquency rates for consumer credit cards which refer to the number of credit card holders late on their credit card payments fell to 3.62% in the period April-June 2011. In July 2011 the delinquency rates hit an all time low as balances showing a late payment fell to 3.09%. This is the 21st consecutive month where delinquency rates have fallen.

Charge-offs slightly up

Charge offs increased slightly to 6.09% in July 2011. Charge offs occur when a credit card company declares a consumer debt a loss for the company. This happens when a consumer is approximately 180 days late in paying their credit card debt.

Low delinquency means strong economy – not this time

Analysts indicate the drop in the delinquency rate shows that consumers are trying to pay off their debt and not looking to create any additional debt. Jeffrey Hibbs, an analyst with Dow Jones said, “Charge-offs is expected to decline further given the improvement in delinquency rates, which are often a harbinger of the future charge-off rate trend.” The credit card delinquency rate or default rate is usually a way to measure the health of the economy. Historically, when consumers stop paying their bills and delinquency rates climb it means the economy is in trouble. Some economists referring to the drop in delinquency in spring declared that the worst of the recession was behind us. In light of newer economic numbers this may have been premature. Now analysts are indicating that the low numbers for credit card delinquency mean something else altogether. What it appears to show is that American consumers are nervous about the economy and the use of credit cards is down. Some eight million consumers just stopped using bank issued or general purpose credit cards at all in the last twelve months.

Credit card demographics

So what is credit card usage these days and what is the credit card debt for the country? There are 609.8 million credit cards in use according to the Federal Reserve Bank of Boston and the average credit card debt that consumers are dealing with is $15,799. The Federal Reserve reports that the total U.S. consumer debt is $2.43 trillion as of July 2011. While average credit cardholders have 3.5 credit cards more than 29% of the respondents of a recent poll indicated they had no credit cards at all.

Trend of lower delinquencies to continue

Industry experts anticipate despite the recent economic downturn, the trend of declining credit card delinquencies will continue. The number of charge offs are also expected to decline in the near future. Two major credit card issuers Bank of America and Citi reported increases in default rates but their numbers are also expected to drop.

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