Spurred by strong economy, card delinquencies dropped in Q2, banks say

Number of overdue card accounts fell below 3 percent, remaining well below the 15-year average

Fred O. Williams
Senior Reporter
Expert on consumer credit laws and regulations.

APRs to rise

Credit card users had an easier time making their payments in the second quarter of 2018, according to new figures from the American Bankers Association.

Bank cards – credit cards issued by banks – posted a delinquency rate of 2.93 percent of accounts in the April-to-June period. That was down from 3.06 percent of accounts being delinquent in Q1. An overdue payment makes an account delinquent.

"As the economy keeps humming along, delinquencies have stayed at a very low level," ABA chief economist James Chessen said in a news release. A healthy job market and rising savings rates are helping consumers keep up with their financial obligations.

However, "the holiday season is fast approaching and a watchful eye on budgets is the key to successfully managing debt obligations," he added.

See related: Banks tighten standards for credit card applicants, Fed survey says

Bank card delinquencies fall below 3%

 

Delinquencies at a glance

Here's a breakdown of other consumer loan types and their delinquency rates in the second quarter of 2018:

  • Revolving non-credit card loan delinquencies rose from 1.56 percent to 1.57 percentDirect auto loan delinquencies – those arranged by a bank rather than a car dealer – fell from 1.10 percent to 1.06 percent.
  • Indirect auto loan delinquencies were unchanged at 1.93 percent.
  • Home equity loan delinquencies rose from 2.31 percent to 2.43 percent
  • Home equity line-of-credit delinquencies rose from 1.14 percent to 1.15 percent
  • Property improvement loan delinquencies fell from 1.16 percent to 1.07 percent
  • Mobile home loan delinquencies fell from 5.09 percent to 5.07 percent
  • Personal loan delinquencies fell from 1.65 percent to 1.47 percent.
"We expect the strong job market to continue over the next year, which should improve household finances and help keep delinquencies in check."

Low delinquencies meet rising card balances

The low bank card delinquency rate comes as total balances on cards are climbing. Consumer revolving debt grew $1.2 billion in July to $1.037 trillion, according to the Federal Reserve's most recent consumer credit report.

In the first quarter, card delinquencies had jumped more than one-half of 1 percentage point, climbing above 3 percent of accounts. Even so, the rate of delinquencies remained below the long-run average of 3.55 percent of accounts.

In addition to watching bank cards, the ABA's quarterly Consumer Credit Delinquency Bulletin tracks car loans, personal loans and some property related loans, but not home mortgages.

The bank industry group's composite delinquency ratio of eight closed-end types of loans rose slightly to 1.76 percent of accounts, from 1.73 percent. The overall composite ratio, a broad measure of consumers' financial strength, remains well below the 15-year average of 2.13 percent.

Looking ahead, Chessen said the strong economic conditions should continue, helping consumers make their loan payments on time. "We expect the strong job market to continue over the next year," he said, "which should improve household finances and help keep delinquencies in check."


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Updated: 10-17-2018