May 20, 2014

Credit Card Delinquencies and Debt Decline From 2013

Research shows consumers’ holiday bill payments, in part from recent tax refunds, contribute to lower credit card balances in the first quarter of 2014.

Credit card balances and delinquency rates have declined in the last year, according to new research from TransUnion.

The credit card delinquency rate, reflecting the ratio of borrowers 90 days or more delinquent on their general purpose credit card payments, declined from 1.51 percent in the first quarter of 2013 to 1.37 percent in the first quarter of 2014, according to the TransUnion Industry Insights Report.

The average credit card debt per borrower also declined from $5,201 in the first quarter of 2013 to $5,164 in the first quarter of 2014.

Credit card debt is about 20 percent of what is taken in by the credit and collection industry, according to ACA International’s survey by Ernst & Young on the economic impact of third-party debt collection, which was conducted in fall 2011 and released in February 2012.

The Federal Reserve Bank of New York recently released a report that credit card debt nationwide declined $24 billion in the first quarter of 2014.

According to TransUnion’s research, both the credit card delinquency rate (down from 1.48 percent in the fourth quarter of 2013) and credit card debt (down from $5,325 in the fourth quarter of 2013) decreased due to seasonality associated with improved payment patterns after the holiday season.

"We generally see lower credit card delinquency rates and balances in the first quarter of the year as many consumers pay down credit cards that they charged up during the holiday season," said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. "Some consumers who receive tax refunds near the end of the first quarter also use these funds to help pay off debts, including their credit cards."

TransUnion reported 344.53 million credit card accounts as of the first quarter of 2014, up from 329.73 million a year ago.

"We see some positive signs in the market with more credit cards being issued although the sector as a whole is growing at a small rate," said Toni Guitart, director of research and consulting in TransUnion’s financial services business unit. "It is also encouraging that delinquency levels have dropped on a year-over-year basis even though the share of non-prime consumers gaining access to card credit has increased. Together, these findings point to a healthy credit market."

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