The national credit card delinquency rate (the ratio of borrowers 90 or more days past due) dropped to 0.63% in the second quarter ended June 30 from 0.73% the previous quarter, according to credit-reporting agency TransUnion.
The credit card delinquency rate is at its lowest mark since reaching 0.60% one year ago in Q2 2011. Before that, the last time the credit card delinquency rate was below its current level was in Q4 1994 (0.61%).
“The national credit card delinquency rate continues to remain at the lowest levels we’ve observed in 18 years,” says Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “It’s a positive situation because average borrower balances have increased over the past year as new card originations have grown. These low delinquency rates reflect both continued conservatism in lender underwriting and the ongoing prioritization of card payments among consumers.”
Average credit card debt per borrower increased over the past year, moving up from $4,699 in Q2 2011 to $4,971 in Q2 2012. However, credit card debt continues to remain relatively low, more than $700 lower than just three years ago ($5,719 in Q2 2009).
Total card originations in Q2 2012 grew by approximately 4% relative to the same period last year. The share of non-prime, higher-risk consumers (with a VantageScore credit score lower than 700 on a scale of 501-990) was 26.1%.This is slightly lower than one year ago (27.0% in Q2 2011), but still much higher than the 20.6% observed in Q2 2010.
“While non-prime borrowers made up a slightly smaller percentage of all new trades in this latest quarter, they 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 Becker. "This is important to note, because one would think delinquencies would rise as non-prime borrowers gain more access to credit. We’ve found that consumers continue to value their credit cards more than ever and will likely do so at least until unemployment abates.”
Only five states saw increases in their credit card delinquency rates quarter over quarter. On a more granular level, 20% of metropolitan statistical areas (MSAs) saw increases in their respective credit card delinquency rates in Q2 2012. This was down compared to last quarter, when 28% of MSAs experienced an increase.
Based on current economic assumptions, TransUnion is maintaining previous forecasts for credit card delinquencies to remain near current levels, with potentially some seasonal fluctuations, through the end of 2012.
The forecast is based on seasonality effects and various other economic factors such as anticipated gross state product, consumer sentiment, disposable income and employment conditions. The forecast changes as the economy deviates from a conservative economic forecast, if there are unanticipated shocks to the economy affecting recovery, or if lenders materially change their underwriting standards.
Last week, TransUnion reported that the delinquency rate on mortgage payments more than 60 days late fell to 5.49% in the second quarter ended June 30, and has dropped nearly 9% in the first six months of the year.