US Credit Card Delinquencies Rise to 4.75% of All Accounts in 1Q09
The American Bankers Association’s Consumer Credit Delinquency Bulletin reported today that in the first quarter of 2009 that bank card delinquencies rose 23 basis points to 4.75 percent (s.a.) of all accounts, compared to 4.52 percent in the previous quarter. (The record was 4.81 percent in the second quarter of 2005.) The balances on those delinquent accounts rose dramatically, up 108 basis points to 6.60 percent (n.s.a.) of the value of all outstanding bank card debt, marking a new record.
ABA Chief Economist James Chessen said the figures are a natural consequence of mounting job losses in a weakening economy. “The number one driver of delinquencies is job loss,” Chessen said. “When people lose their jobs, they can’t pay their bills. Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround,” Chessen said, adding that job growth is not likely to improve in the foreseeable future. “However, many people are taking greater control of their finances by cutting spending, lowering debt and saving more money.”
Chessen said the unemployed may be using bank cards to bridge a temporary income gap, especially with less home equity to fall back on as housing prices continue to fall.
Reflecting continued weakness in the housing sector, delinquencies for the home equity category also hit record highs: home equity loan delinquencies rose 49 basis points to 3.52 percent of accounts, and home equity lines of credit delinquencies rose 43 basis points to 1.89 percent of accounts.
“Even if home prices stop falling later this year, unemployment will keep home equity delinquencies high for some time,” Chessen said.
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