dcsimg

Credit card delinquency rates drop again, matching Clinton-era lows

By , CardRatings contributor
  • Google +
  • Twitter
  • Facebook
credit-card-delinquency-rates-drop-clinton-era

The last time credit card delinquency rates were this low, "Forrest Gump" was on the Oscar trail and a new medical drama called "ER" had just launched on NBC. According to quarterly figures from the Federal Reserve, the percentage of credit card accounts behind on payments during the third quarter of 2011 dropped to 3.47 percent. The delinquency rate reached 3.46 percent during the first quarter of 1995, after dipping even lower during 1994.

The Fed started tracking the statistic in 1991, making last quarter's figure one of the lowest results ever posted by government analysts. However, the good news from the credit card sector only offsets record high delinquency rates on home loans. Residential loan delinquencies have remained above 10 percent since the fall of 2009, while only about 2 percent of mortgage holders fell behind on monthly payments in 1994.

Why do credit cards look so much better than mortgages when it comes to delinquencies?

  • Consumers often pay smaller bills first. When it's easier to pay a few $50 credit card bills than make a $2,000 mortgage payment, Americans often opt to fall behind on the fewest number of bills.
  • Credit card issuers act more quickly to resolve delinquencies. Falling behind on a credit card can lead to declined charges, instant penalties and phone calls from collections agents. A suspended credit card carries bigger short-term consequences than a missed mortgage payment, despite the pleas of personal finance experts.
  • Delinquent mortgage holders carry fewer credit cards. In late 2008 and early 2009, many banks purged their portfolios of high-risk credit card accounts. Homeowners already behind on a mortgage don't have much opportunity to rack up credit card debt compared to just a few years ago.

In October, Citigroup analyst Donald Fandetti told the Wall Street Journal that he expected delinquency rates to flatten through the end of 2011. The historically low delinquency rates give larger banks more room to issue more credit cards for fair credit, a move that Fed officials hope can stimulate economic growth during the holiday season.

0 Responses to "Credit card delinquency rates drop again, matching Clinton-era lows"

No Comments

Leave a Comment
 
 
 
About Our Ratings ×

Our editors rate credit cards objectively based on the features the credit card offers consumers, the fees and interest rates, and how a credit card compares with other cards in its category. Ratings vary by category, and the same card may receive a certain number of stars in one category and a higher or lower number in another.

The ratings are the expert opinion of our editors, and not influenced by any remuneration this site may receive from card issuers.

Advertisers in our database are highlighted, and advertisements include an option to apply using links on our site. CardRatings.com may be compensated by companies mentioned on the site when a user's application is accepted or approved by such companies.

How do your cards stack up?

Compare your card starting here

NEXT »

Featured Partner Cards

loading