Credit Card Delinquencies Continue to Plunge

According to a report that was released recently by the credit bureau giant TransUnion, the national credit card delinquency rate dipped to .06% at the finish of the second quarter of 2011. This decrease marks the sixth consecutive quarter for a decline in delinquency rates, which is the amount of borrowers with an account past due by 90 days or more. This is the lowest credit card delinquency rates have been in about 17 years.

"National credit card delinquency rates have fallen to levels not seen since 1994 as consumers continue to tighten their spending," said Ezra Becker, the vice president of research and consulting in TransUnion's financial services business unit, to the site marketwire.com. "TransUnion believes that the recovering economy is only indirectly impacting delinquency rates. More important and impactful to the decline in bank card delinquency are that consumers are using credit cards more responsibly; a large number of delinquent accounts have moved to charge-off status; and lenders remain conservative in their underwriting."

Consumers shelled out roughly $72 billion more for credit card payments then for new purchases between the first quarters of 2009 and 2010, a TransUnion credit card deleveraging analysis revealed.

From the first to the second quarter of 2011, 49 states, plus the District of Columbia, accomplished declines in their credit card delinquency rates with the only state to suffer an increase being North Dakota.

"Since the recession began, lenders have been increasingly scrutinizing the borrower's overall financial situation, e.g. duration of employment, credit and income history -- holding consumers to higher standards for loan approval," says Becker to marketwire.com. "Those approved are less likely to default even in the face of continued high unemployment levels. Although there are still seasonal influences underlying credit card repayment patterns, they have been muted by the conservative use of credit by consumers. As the slow economic recovery continues, this trend should carry through the end of the year."

TransUnion predicts credit card borrower delinquency rates will continue to fall throughout the remainder of 2011. This will keep happening only if the as economy continues to slowly recover and lending institutions uphold their moderately conservative underwriting practices.

Marketwire.com explains that “TransUnion's forecast is based on various economic assumptions, such as gross state product, consumer sentiment, disposable income, and interest rates. The forecast changes as the economy deviates from a conservative economic forecast or if there are unanticipated shocks to the economy affecting recovery.”

Lauren Palmer

Lauren Palmer is a freelance writer who is a regular contributor to a variety of online and print publications. Although she has much to say about many subjects, she specializes in topics pertaining to personal finance. She holds a bachelor’s degree from NYU in journalism.