Credit Card Delinquencies Fall to Lowest Level in 15 years

Consumers, in general, are repaying their credit card debt in a timely manner, with delinquency rates in the first quarter of 2011 reaching levels not seen in almost 15 years, according to new data released by TransUnion today.

TransUnion’s quarterly analysis of trends in the credit card industry revealed that the national credit card delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their bank-issued credit cards) decreased to 0.74 percent in the first quarter of 2011. This delinquency rate is down almost 10 percent quarter over quarter (0.82 percent 4Q10) and down nearly 33 percent year over year (1.11 percent 1Q10). This is the lowest level reached since the third quarter of 1996 (0.76 percent).

In the first quarter of 2011, the average credit card debt per borrower (defined as the aggregate balance on all bank-issued credit cards for an individual bankcard borrower) fell by 5.8 percent to $4,679 from the previous quarter’s average of $4,965. This is the lowest average since the third quarter of 2000 ($4,695) and is markedly lower than the peak experienced during the recession ($5,776 1Q 2009).

“Two big reasons for the decrease in credit card delinquency are that consumers continue to deleverage, and lenders are still conservative in how they extend new card credit,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “In today’s economy, many consumers are continuing the trend of paying their credit cards before or in lieu of their mortgages, reversing the typical payment hierarchy. In paying their credit cards on time and reducing their debt, consumers are ensuring their access to liquidity, if needed, as the economy slowly recovers.”

Q1 2011 Credit Card Statistics

Credit Card Delinquency Rates:

– The incidence of credit card delinquency was highest in Nevada (1.16 percent), followed by Florida (1.04 percent) and Mississippi (0.92 percent). The lowest rates were found in North Dakota (0.36 percent), Alaska (0.46 percent) and Vermont (0.48 percent).

– Only the District of Columbia experienced an increase in credit card delinquency since last quarter. The two areas of the country with the largest quarter-over-quarter drops were Vermont (-22.6 percent) and North Dakota (-20.0 percent).

– On a local level, approximately 75 percent of the country’s metropolitan statistical areas (MSAs) showed a quarter-over-quarter decrease in their credit card delinquency rates, as compared to about half in the fourth quarter of 2010.

– The MSA with the largest credit card delinquency drop was Ames, IA (-52 percent). The MSA with the largest increase was Ithaca, NY (54 percent).

Credit Card Debt:

– Alaska remained the state with the highest average credit card borrower debt at $6,811, followed by North Carolina at $5,446 and Hawaii at $5,303

– The lowest average debt was found in Iowa ($3,649), followed by North Dakota ($3,903) and South Dakota ($3,970).

– No state showed an increase in average credit card debt from the prior quarter. The largest decreases over the previous quarter occurred in Tennessee (-17.2 percent), the District of Columbia (-9.9 percent), and Montana (-7.7 percent).

Credit Card Originations:

– On a year-over-year basis, national credit card originations increased by 23.6

percent. The first quarter of 2011 marks the third consecutive quarter of increases since the recession began in late 2007. This is in line with first quarter data from the Federal Reserve’s Senior Loan Office Opinion Survey, which reported about 20 percent of banks having eased standards for approving credit card applications.

– Originations increased across the board, as all states showed upward movement year over year. The states with the greatest increases were Nevada (45.7 percent), Maryland (37.1 percent), and Alaska (34.9 percent).

U.S. Analysis

The 5.8 percent quarter-over-quarter drop in the average outstanding credit card balance per borrower was not anticipated, as retail sales continued to climb during the first quarter of 2011. This near record low shows that consumers are relying less on credit cards as a preferred payment method. TransUnion does not expect large increases in average credit card balances over the next two quarters due to the continuing deleveraging and the relatively high consumer savings rate (now at 5.5 percent).

“From a delinquency perspective, not since the summer of 1996 have consumers demonstrated a better level of fiscal responsibility in meeting debt obligations on a timely basis. Even with increased economic pressures, they are placing a premium on paying off their credit card obligations and maintaining the health of their card relationships,” said Becker.

Forecast

“Since the beginning of the recession, TransUnion’s national and state forecasting models have tracked how credit card delinquency rates are impacted by economic factors such as disposable income, interest rates, consumer confidence and GDP. Based on our current economic assumptions, TransUnion believes that the 90-day credit card delinquency rate will still be impacted by seasonal factors, but generally continue to drift downward below 0.7 percent by the end of 2011,” said Becker.

- At the state level, Florida is again expected to experience the highest delinquency rate by the end of 2011 (0.98 percent), while North Dakota is anticipated to show the lowest delinquency rate (0.37 percent).

TransUnion’s Trend Data database

The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data available on TransUnion’s Web site. Information for this analysis is culled from TransUnion’s Trend Data and the anonymous credit files of approximately 10 percent of credit-active U.S. consumers, providing a real-life perspective on how they are managing their credit health.

TransUnion’s Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels. For the purpose of this analysis, the term “credit card” refers to those issued by banks.

About TransUnion

As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.transunion.com/business