Bankruptcy

Credit Card Delinquencies Down in First Quarter

By Chris Kramer

As many people who have filed for bankruptcy know, one of the main causes of filing bankruptcy is unmanageable credit card debt. Often, a bankruptcy filing comes after months of missed payments.

Recent data from the American Bankers Association (ABA) shows that, as a nation, we?re improving our on-time payment rate for our credit cards. In fact, we?ve improved in a variety of areas:

• Bank card delinquencies reportedly fell to 3.88 percent of all accounts, down from 4.39 percent in the fourth quarter of 2009. The current rate is also apparently below the 15-year average of 3.93 percent and stands as the lowest rate recorded since 2002.
• Auto loan delinquencies fell in both the direct category (from 1.94 percent to 1.79 percent) and the indirect category (from 3.15 percent to 3.04 percent).
• Home equity loan delinquencies dropped from 4.32 percent to 4.12 percent, marking the first dip in two years, according to the ABA.
• Personal loan delinquencies decreased slightly, from 3.63 to 3.61 percent.
• Property improvement loan delinquencies inched downward, from 1.63 percent to 1.40 percent.
• Home equity lines of credit delinquencies dropped from 2.04 percent to 1.81 percent.

The ABA considers loans delinquent when payments are thirty days or more overdue, so the decrease in delinquency rates suggests that more Americans are making a concerted effort to make payments on time, on a variety of loan types.

But not all of the ABA?s findings were rosy: the group also noted that several categories saw increased delinquency in the first quarter of 2010:

Marine loan delinquencies: Up to 1.93 percent from 1.63 percent
• Mobile home loan delinquencies: Up to 3.65 percent from 3.41 percent
• RV loan delinquencies: Up to 1.58 percent from 1.44 percent
• Non-card revolving loan delinquencies: Up to 1.63 percent from 1.46 percent

While some analysts point to the overall decrease in consumer delinquencies as evidence to support the theory that the economy is on the upswing, others looking at the financial landscape aren?t so sure.

Numbers from the Federal Reserve released earlier this month indicate that, overall, consumer credit decreased in May 2010, which can be read as a positive sign (because people are borrowing less and so are accumulating less debt) or as a negative sign. After all, one of the main reasons we?re taking out fewer loans and opening fewer credit cards as a nation is that lenders have tightened their standards and are less willing to offer us money.

The Fed?s numbers are especially telling when broken into their categories: while consumer debt overall decreased at an annual rate of 4.5 percent in May, revolving credit (which encompasses the vast majority of credit cards) decreased at a rate of 10.5 percent, and non-revolving credit decreased only at a rate of 1.5 percent.

The jury may be out on whether these numbers are good for the larger economy, but if you?re part of the trend of paying loans on time, keep up the good work.

Additional Resources

Credit Card Borrowing, Delinquency, and Personal Bankruptcy

Debt, Delinquency, and Consumer Spending

Full post as published by The Bankruptcy Blog on July 20, 2010 (boomark / email).