Credit card delinquencies decline in Q2
Consumer credit delinquency rates showed improvement in the second quarter (Q2) of 2012, led by positive movement with bank credit cards, the American Bankers Association (ABA) said in a recent report.
According to the ABA’s Consumer Credit Delinquency Bulletin, bank credit card delinquencies dropped to 11-year lows in Q2, declining to 2.93 percent from 3.08 percent the previous quarter.
The 2.93 percent mark is also well below the 15-year average of 3.91 percent, the ABA noted.
“Consumers are saving more and borrowing less as they work to pay down debt at a faster rate,” James Chessen, ABA’s chief economist, said in a statement. “Economic uncertainty has made consumers hesitant to take on new debt, and building a stronger financial base has become a priority.”
The ABA’s composite ratio, which included delinquency rates of eight different categories, dropped from 2.35 percent to 2.24 percent of all accounts quarter-over-quarter. This 2.24 percent mark is also below the 15-year average of 2.40 percent.
Despite the positive results with credit cards and with the overall composite, Chessen was disappointed that more comprehensive improvement across all categories wasn’t seen. For example, delinquency rates of all three home loan categories tracked increased in Q2.
“The lack of broad-based improvement gives us pause about the future,” he said. “The economy experienced turbulence in the second quarter. Slow job growth and continued uncertainty means many consumers will face challenges managing their debt going forward.”
The delinquency rate of home equity lines of credit increased to 1.91 percent in Q2, up from 1.78 percent, while home equity loan delinquencies rose to 4.09 percent from 4.00 percent the previous quarter.
“While the housing market appears to have turned a corner, we are many quarters away from seeing improvement filter through to reduce home-related delinquencies,” Chessen said.