Eight million more U.S. cardholders have shelved their bank-issued credit cards, bringing to 40% the percentage of creditworthy, credit-active consumers who did not use their bankcards within the past 12 months, according to new data TransUnion released Nov. 29.
The Chicago-based credit bureau says well more than 70 million consumers did not have an active general-purpose, bank-issued, credit card last year, bringing the total number of inactive accountholders to 78 million. The firm’s data exclude some 50 million unbanked consumers and those with no credit history.
The data suggest card issuers will have a difficult time digging out from the recession, which caused a widespread slowdown in consumer credit card spending as unemployment spiked and issuers restricted borrowers’ credit lines, Chet Wiermanski, TransUnion global chief scientist, tells PaymentsSource.
On the positive side, the improving economy plus consumers’ reduced credit card use this year sparked a significant improvement in average card delinquency rates, and issuers recently registered the first overall growth in new credit card accounts in three years.
“Credit card issuers recently began mailing out preapproved card offers once again and consumers are responding, ... and we expect to see more of this if the economy continues improving and lenders remain increasingly confident about controlling risks,” Wiermanski says.
The average delinquency rate on outstanding credit card balances at least 90 days past due improved by 27 basis points, to 0.83% during the third quarter ended Sept. 30 from 1.1% a year earlier, according to TransUnion. The average credit card delinquency rate was highest in Nevada at 1.28%, followed by Florida at 1.09% and Mississippi at 1.06%.
The national average outstanding bankcard balance fell 11.5%, to $4,964 from $5,612 a year earlier, with the highest average card balance noted in Alaska at $7,159 followed by Hawaii at $5,716 and North Carolina at $5,640, TransUnion says.
Credit card account originations, or new accounts, increased in all states except nine during the third quarter for the first time since late 2007, TransUnion says. The firm’s regional data show that states with the highest year-over-year account-origination growth were Delaware at 21.3%, Oklahoma at 16% and Pennsylvania at 15.8%. Regions with the steepest declines in account originations were the District of Columbia at 10.3%, Minnesota at 9.6% and Michigan at 4.2%.
Among the cardholders who stopped using credit cards within the past year, higher-income consumers were just as likely as those with lower incomes to suspend their card use, TransUnion says.
“Consumers across the board pulled back on credit card spending, partly based on banks’ risk-management measures and also because consumers started doing a better job of managing credit based on their circumstances,” Wiermanski says. “We forecast that as a result, the delinquency rate will continue to drop through the end of this year and well into next year, and lenders are gradually becoming more optimistic about issuing new accounts.”
TransUnion gathered its data from among 27 million anonymous consumer records randomly sampled from its national consumer credit database, which it says represents about 10% of credit-active U.S. consumers.
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