Late credit card payments unchanged in final quarter of 2006

By Jeremy M. Simon

While late payments on home equity loans rose in the fourth quarter of 2006, late payments on credit cards were basically unchanged, according to the American Bankers Association.  That data indicates that housing pressures have not yet caused greater difficulty for consumers looking to pay their bills.

The ABA reported that late payments on home equity loans increased to 1.92 percent in the final three months of 2006 from 1.79 percent in the third quarter, reaching the highest level since the first quarter of 2006. 

However, the rate of credit card delinquencies dipped slightly to a seasonally adjusted 4.56 percent of accounts from 4.57 percent in the prior quarter, which was the highest rate since the spring of 2005.

In its quarterly study of U.S. consumer borrowing, the ABA surveys over 300 U.S. banks.  Delinquencies are defined as payments that are 30 or more days past due. 

On the whole, the rate of delinquencies among all eight loan categories followed by the ABA firmed to 2.23 percent in the fourth quarter from 2.12 percent in the previous quarter, remaining near the 10-year average rate of 2.20 percent.

Over recent months, late payments and defaults have grown among homeowners with poor credit histories or with adjustable-rate mortgages whose rates are resetting upward.

In separate congressional testimony on March 28, Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Henry Paulson indicated that they believed the wider economic effects of subprime mortgage problems were probably "contained."

ABA Chief Economist James Chessen agreed that any spillover impact might be limited, since credit card delinquencies usually occur first since they are unsecured, and consumers are more hesitant to miss auto and home payments.  He noted that the lack of an increase in late credit card payments suggests that consumers are handling their debt well.

Published: April 13, 2007

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