Since the end of the recession, consumers have been repeatedly cutting the rates at which they feel behind on their credit card payments and repeatedly failed to pay the bills, but that trend might be reversing itself.
Analysts recently suggested that the record-low instances of delinquency and default observed by credit card lenders since the end of the recession were expected to bottom out at some point this year, and already, this might be taking place for at least one major lender, according to a report from Dow Jones Newswires. In its monthly filing with the Securities and Exchange Commission, Capital One Financial, one of the six largest credit card lenders in the nation, reported that it saw instances of defaulted accounts rise to 4.07 percent of all balances in April, up from 3.85 percent in March. Defaulted accounts are those that are 90 days or more behind on payments and are charged off by lenders as being uncollectable.
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But at the same time, the lender noted that short-term delinquencies — those accounts that are only 30 days or more behind on payments — fell once again in April, the report said. In all, this type of late payment slipped to 3.18 percent of all accounts, down from 3.25 percent in March. Generally, experts view fluctuations in lender delinquency rates as predictors of future charge offs, indicating that progress could be uneven as the year goes on.
During the recession, many consumers ran into severe financial difficulty that made it difficult or even impossible for them to pay their credit card bills on time every month, and instances of both delinquency and default spiked considerably. The problem became so widespread, in fact, that many borrowers saw their credit scores fall to the point where they could no longer qualify for any types of credit, and were therefore forced out of the borrowing system altogether, particularly as most lenders significantly increased lending standards to guard themselves against further losses.
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But now, as the economy improves and consumers get a better handle on their finances, many lenders are once again broadening issuing standards, giving consumers with subprime credit scores access to new accounts once again. Some experts believe this might be leading to an increase in charge offs, but others say they had to increase naturally back to historical averages.