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Credit Card Delinquencies Hit 18-Year Low

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Delinquency by consumers declined in the fourth quarter of 2012 and bank card delinquencies hit an 18-year low, according to the Consumer Credit Delinquency Bulletin by the American Bankers Association.

The ABA tracks delinquencies, or accounts at least 30 days past due, in eight loan categories to create a composite ratio. This ratio dropped 17 points to a 1.99 percent of consumer accounts. This is quite lower than the 15-year average of 2.39 percent.

ABA’s Chief Economist James Chessen suggested an increased desire for financial savings as a result of economic uncertainty was the primary reason for delinquency improvement among consumers.

“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” Chessen said. “While this conservative approach to credit may slow economic growth in the short-term, it portends stronger, more consistent growth in the future. The sharp decline in delinquencies reinforces the notion that the economic recovery has become more self-sustaining and is on a path to increased growth.”

The delinquency rate on credit cards dropped to 2.47 percent during the fourth quarter of 2012. The recorded levels are the lowest since the third quarter of 1994, the report revealed. To put that in perspective, delinquent credit card accounts totaled 5.01 percent in 2009 — almost double the current rate.

“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” Chessen added.

Delinquencies on home loans also decreased in the final quarter of the year.

“While home-related delinquencies remain at elevated levels, even one quarter of declines could signal the start of a slow but steady improvement,” Chessen said.

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Image: iStockphoto

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