Credit card late payments fall to lowest level in three years, bank group says
'Robust economy' is helping consumers manage their debt levels
Expert on consumer credit laws and regulations.
Late payments on bank-issued credit cards improved significantly in the final three months of 2017, the American Bankers Association announced Wednesday.
Delinquencies fell to 2.46 percent of bank card accounts, down from 2.62 percent in the previous quarter. The bank industry group counts late payments that are 30 days or more overdue as a delinquency.
It was the lowest quarter-end level for late payments in more than three years, ABA said.
“Consumers are supported by a robust economy, and they continue to make judicious decisions when managing their debt levels,” ABA chief economist James Chessen said in a news release.
Credit card late payments improve in Q4 2017
- Bank-issued credit card delinquencies were 2.46 percent of all accounts, down from 2.62 percent.
- Delinquencies are well below the long-term average of 3.60 percent over the past 15 years.
- The improvement contrasts with a study from the Federal Reserve Bank of New York, which showed delinquencies increasing per dollars of total balance.
- The difference suggests large-balance accounts are having more trouble making payments than the average.
The industry group’s numbers appear to conflict with reports from the Federal Reserve Bank of New York, which say late payments on cards rose in the fourth quarter.
Reporting differences suggest pressure for high-balance accounts
The ABA figure is based on the number of accounts that are late. The New York Fed measures late payments in relation to total balances, in dollars.
The gap in the two figures suggests that high-balance accounts are having more trouble making their payments than the average credit card user.
In addition, the New York Fed numbers are drawn from anonymized credit reports, and look at “serious” delinquencies of 90 days or more.
While the ABA’s more optimistic finding comes during a strong economy for consumers, it also comes during a time of rising credit card debt.
Consumer revolving debt surpassed a nine-year record in November 2017, during the fourth quarter, according to the Federal Reserve’s monthly consumer credit report. And the growing total balances continued into this year.
Other findings from ABA’s Q4 2017 delinquency report
- Direct auto loan delinquencies – those arranged through a bank – fell from 1.12 to 1.07 percent. Dealer-generated loan delinquencies fell from 1.84 to 1.78 percent.
- Home equity loan delinquencies fell from 2.42 to 2.28 percent. However, home equity lines of credit delinquencies rose from 1.08 to 1.16 percent.
- Personal loan delinquencies fell from 1.90 to 1.57 percent. However, noncard revolving loan delinquencies rose from 1.57 to 1.62 percent.
Overall low rate of late credit card payments
One thing both sources agree on: Late payments on cards are low by long-run standards.
Over 15 years, the average delinquency rate is 3.60 percent of accounts, the bankers’ group said, compared to the current 2.46 percent.
And New York Fed data show the fourth-quarter delinquency rate is about half the peak levels reached in the aftermath of the Great Recession.
Cards weren’t the only form of consumer debt showing strength – delinquencies in eight closed-end loan categories all fell.
“It’s rare to see delinquencies fall in nearly every category, and the levels continue to be very low by historical standards,” Chessen said.
- Americans' fears of missing a debt payment rise – Americans' fears of missing a minimum debt payment rose in June for the third month in a row, according to the New York Fed’s Survey of Consumer Expectations ...
- Fed: Card balances rose by $9.7 billion in May – Credit card balances surged to a new record in May, according to the Federal Reserve ...
- Poll: Women more prone than men to miss card payments – People miss credit card payments for many different reasons, but the most common are forgetting and not having enough money ...