December 1, 2008
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News: On the Road to Delinquent, CC…
As many of us continue on our journey to Delinquencyville, we may as well get to know some of the others on the bus and how close we're getting to our destination. For starters, credit card delinquencies have risen over the past year and average borrowing has jumped 7.7 percent. The highest increases always seem to in the third quarter every year, according to TransUnion LLC, a key credit reporting agency. The third quarter ends on Sept. 30. At that time, 1.09% of our nation's credit card holders became delinquent for at least 90 days for, at least, one of their credit cards. This is an increase over the 1.03% that was recorded for the third quarter of last year. Comparing this year's third quarter from the quarter before, we find a sharply rise from 1.04% ending June 31 of this year. Only a rise of 0.01% over three quarters coming and then a sharp jump of 0.05% just in the last quarter.
These third quarter peaks seem to be cyclical. TransUnion's financial services group principal consultant, Ezra Becker, explains that the late credit card payment trends tend to rise toward the end of summer. The fact that this has continued year after year indicates that our bad economy continues to worsen with time. Not all news is bad news, though. Consider that nearly all Americans are still keeping up with their credit card payments or, at least, 98 percent of them are.
The bad economy's impact is clearly illustrated by the tendency for delinquency rates to worsen in the more economically depressed areas. As an indicator, it should be noted that the credit card market isn't nearly as volatile as the home mortgage market is. Fortunately for the credit card market, they have much more flexibility. They can adjust segmented elements in troubled areas in many ways that mortgage lenders cannot. They have three or more different interest rates to play with, adjustable credit limits and can stop further borrowing without subjecting consumers into foreclosure.
As far as debt load, these figures are worsening also. According to TransUnion's figures, there has been a 7.7% jump in borrower debt load in the past year, rising from an average of $1,617 last year to $1,742 this year. A 1.4% increase has occurred just since last quarter, when it was only $1,717. The recession is certainly taking it's toll and Americans are forced to increase credit card debt just to live as paychecks continue to dwindle.