It seems that consumers are becoming a little less responsible about making payments towards their credit card debts, as indicated by the numbers.
Greater numbers of Capital One cardholders have been making late payments on their accounts since June. Not only has the delinquency rate been rising, it has been rising by a great amount each month. As The Wall Street Journal reported, Capital One`s delinquency rates have been on an upward trajectory as follows:
May – 3.32%
June – 3.33%
July – 3.37%
August – 3.43%
September – 3.65%
May was the lowest that Capital One’s delinquency rates have been since before the start of the 2007 recession.
J.P. Morgan Chase, Bank of America, Discover, and American Express have all reported a recent rise in late payment rates as well.
Analysts have been anticipating a rise in delinquency rates since, at many banks, they are considered to be “well below typical seasonal trends,” wrote Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, according to The Wall Street Journal. Sluggish economic growth, combined with the high rate of unemployment, will likely cause the accounts of more and more borrowers to slip into delinquency as the holiday season fast approaches.
“Any time delinquencies go up, I think it’s a cause for concern, especially since we`ve seen a pretty good trend in declining delinquency rates,” said one expert. “It looks like a signal that consumers are struggling.”
An account is delinquent if a payment is 30 or more days past due. The delinquency rate, which measures the percentage of overdue loans, is considered by banks to be an important indicator of future defaults. Banks set aside money to cover future losses, and how much they reserve is determined, in part, by current delinquency rates. The steady decline of such rates during 2010 and throughout the beginning of 2011 allowed most lenders to elevate their earnings by dispensing existing reserves and allotting less money for losses.
Thus far, the rise in late payments has not lead to any sharp increase in charge-offs.