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Credit card delinquencies dip to 17-year low

by Peter Andrew
Credit card delinquencies dip to 17-year low

Every day, it seems, there’s alternatively good credit card news or bad credit card news. Cheer up: today’s is good. Because the number of people who’ve fallen behind 90 days or more past due on their card accounts has dropped to its lowest since 1994. And that, for the numerically challenged, was 17 years ago.

The data, published Tuesday, come from TransUnion, one of the big-three credit bureaus, and are part of a continuing study. They relate to the second quarter of this year.

Manageable credit card debt

A closer look at the figures show that the delinquency rate has fallen to 0.60 percent, down 18.92 percent from the previous quarter, when it stood at 0.74 percent. Taken over the last year, the drop is even more dramatic. In the second quarter of 2010, the same number was 0.92 percent, which makes the reduction over 12 months a whopping 34.78 percent.

It’s important to see these rather dry figures in context. Very roughly speaking (and in terms that could make a statistician climb the walls), the figures suggest that about one-third fewer individuals and families were facing the misery of unmanageable credit card debt in the second quarter of this year than were doing so last. Now that is good news.

Problem credit cards by state

Of course, these are national numbers, and the picture varies from state to state. Nevada continues to be the worst affected by credit card delinquencies with a rate of 0.93 percent, followed by Georgia (0.78 percent), Florida (0.77 percent) and Mississippi (0.75 percent). At the other end of the scale, Alaska had the lowest rate at just 0.39 percent.

Credit card debt in the future

Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit, commented on the nationwide situation in a statement:

National credit card delinquency rates have fallen to levels not seen since 1994 as consumers continue to tighten their spending. TransUnion believes that the recovering economy is only indirectly impacting delinquency rates. More important and impactful to the decline in bank card delinquency are that consumers are using credit cards more responsibly; a large number of delinquent accounts have moved to charge-off status; and lenders remain conservative in their underwriting.

Becker’s last three factors have all applied for the last 30 months or so. But there are signs that they’re all slowing down or reversing. For example, TransUnion’s own figures show that the average credit card debt per borrower crept up to $4,699 in the second quarter. That was only a $20 rise, but it follows earlier significant falls, and suggests–as do the Federal Reserve’s consumer credit data–that many Americans are very quickly becoming more relaxed about taking on additional credit card debt.

So, if you do, you may be right to have a nagging doubt in the back of your mind. The economy is yet to leave intensive care, opinion’s divided over the risk of a double-dip recession, and credit card rates are high. Could this good news–welcome though it is–about delinquency rates be short-lived, and will it be bad news tomorrow?

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