A new report from Experian shows credit card debt delinquencies have declined during the pandemic. But the bureau warns they might shoot up if no second stimulus package comes and extended unemployment benefits run out.
In an Aug. 25 report, the credit bureau Experian revealed the average number of credit delinquencies has gone down across the board over the last six months, despite record unemployment levels.
Experian based its data on the “average number of instances in which a consumer had an account that was 30, 60 or 90 days delinquent in the past 12 months.”
The data show that 30-, 60- and 90-day delinquencies went down by at least 2.4% between January and June, with 30-day delinquencies dropping the most at 8.7%.
“While lower delinquencies sound odd at first, given how many people have lost income due to COVID-19, I think this trend makes sense in the broader context,” said Ted Rossman, industry analyst at CreditCards.com.
Federal stimulus funding has been helpful in getting money to people who need it. And Rossman noted that most people have been spending less, either as a conscious effort to save money or because there are fewer things to do right now.
The trend of lower delinquencies, however, might be artificial.
“Now that most of the stimulus funding has lapsed and as the health and economic aspects of the virus drag on, we could find that delinquencies were delayed, not avoided,” he said.
Credit card delinquencies saw second biggest drop
Although mortgage delinquencies went down the most, credit cards saw the second biggest decline in delinquent accounts. Personal and auto loans came in third and fourth.
According to Experian’s data, the average number of credit card accounts that were ever past due by 30-59 days dropped by 3.9% between January and June.
The average number of accounts past due by 60 or more days went down by 4.6%, and accounts that were delinquent by 90 days or more fell 4.1% .
States with biggest populations trended down
Between January and July, 30-day delinquencies trended down in states with the biggest populations. New York’s delinquencies fell the least, showing only a 1.8% decrease.
California’s average number of 30-day past due accounts dropped by 8.2%, which is about the same as the rest of the country, but three other states with the largest populations beat that figure.
Texas dropped its average number of 30-day past due accounts by 9.7%, Florida by 10.9% and Pennsylvania by 11.7%.
Experian attributes New York’s small drop to the fact that it was hit so hard by the virus and shut down the soonest, while Texas and Florida instituted less stringent shelter-in-place guidelines.
If you can’t pay your credit card bill, speak up
In a recent CreditCards.com poll, 62% of consumers with credit card debt said they would miss payments if the pandemic continues.
Sixty-one percent revealed they may miss payments if they are unable to work, 56% said they would if there’s no more government stimulus money and 26% feared they would without the government’s $600 weekly supplemental unemployment benefit, which expired in July.
If you’re on the verge of falling behind on your credit card payments, speak up and ask your card issuer for relief, Rossman advised.
Your issuer can lower your interest rate, allow you to skip a payment or waive fees, he explained.
“And as long as you have permission, these accommodations won’t hurt your credit score,” Rossman said.