National Credit Card Delinquencies Rate Down by 1.37% in Q1 2015

Credit card delinquency in the United States has fallen by 1.37% in Q1 2015, according to the latest TransUnion Industry Insight Report, released this week. This is the same year-over-year decrease we saw at this time last year. January through March continues to be a period during which credit card debt is at its lowest, with consumers paying off their holiday balances.

TransUnion’s report ranked the cities with the highest and lowest rates of credit card delinquencies. San Francisco, Boston, and Washington D.C. performed the best. Its possible that the high millennial populations of these cities contribute to their low delinquency rates. 

According to the report, consumers below the age of 39 have the highest percentages of credit card delinquencies. However, this age group also might represent a smaller subset of credit card users as a whole. Recent studies have indicated that large numbers of millennials (those who are roughly between 18 and 33 years old) do not carry credit cards – this originating from a general mistrust this generation has towards banks and lending. It follows, therefore, that cities which have many millennial residents would have a lower percentage of their total population relying on credit cards – and, in turn, lower instances of credit card delinquencies.

The Industry Insight Report has revealed that average credit card debt per borrower is also currently at its lowest since Q1 2009. The nationwide average currently sits at $5,142 – down 0.43% from this time last year. Despite this decrease, the latest Federal Reserve Consumer Credit release showed that, as of March 2015, credit card spending is up (a 5.9% increase). This was the first increase in spending this year, as both January and February saw decreases in revolving credit – 1.6% and 5.0% respectively.

Increases in consumer spending might mean bad news for residents of Mississippi, Louisiana, and Georgia. TransUnion reported that these states had the highest credit card delinquency rate percentages. According to a recent study by the Federal Reserve Bank of New York, both Louisiana and Georgia had 18% of its population in a weak, struggling, or declining credit stress level. Those consumers had been 60+ days overdue on their credit card bill for at least 1 quarter in 2014. Mississippi’s rate of credit stress has been highest, at 19%. The residents of these states also had some of the lowest FICO scores in the nation – on average 47.2% of the Mississippi, Louisiana, and Georgia had subprime credit scores (below 660).

While credit card users are considered delinquent after missing a single credit card payment, they are generally not reported to the major credit agencies (Equifax, Experian, and TransUnion) until they miss 2 payments. For TransUnion’s Industry Insight Report, they classify credit card delinquency as being 90+ days past due.

Consumers who become delinquent in their credit card payments find themselves in a financial trap – one that is difficult to escape. Firstly, becoming delinquent in credit payment usually results in being cut off from being able to further use the card for more credit. Budgeting becomes cumbersome, as individuals who could not previously afford to pay their credit card bill now find themselves having a more restricted cash flow. 

Secondly, while refinancing and consolidating their debt to try and control interest payments would work as a solution, missing 2 payments usually severely damages one’s credit score, by upwards of 100 points. As a result, these individuals find themselves without the ability to apply for a balance transfer credit card, which would make managing interest possible. With limited tools and a limited budget, credit card delinquency is as a financial nightmare.

Luckily for a majority of Americans, this is a problem they do not have to face. Up until the end of 2014, 87% of the nation is no more than 60 days overdue on their credit card payments. Despite the grim nature of credit card delinquency, the recent news has been mostly positive – delinquency rates remain low on the national level, and the average credit card debt decreasing per consumer continues to decrease. The data seems to indicate that, for the most part, Americans are getting better and better at paying off their credit card bills.

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