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TransUnion data shows credit activity still on the rise since pandemic lows

But delinquencies might increase as 2.4% of credit card accounts come out of forbearance programs

Summary

TransUnion’s Q4 2020 Industry Insights Report revealed that the consumer credit market is performing well and that the trend will likely continue with additional stimulus money and declining unemployment rates.

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Credit card industry growth is still on an upswing since the lows that occurred when the pandemic first hit, according to TransUnion’s Q4 2020 Industry Insights Report. Most credit products showed increased balances and credit card origination activity has risen.

Matt Komos, vice president of research and consulting at TransUnion, said in a press release that the consumer credit market is performing quite well, thanks to serious delinquency levels staying at near record lows and balance and origination activity experiencing an uptick.

Komos added that the trend is likely to continue due to additional stimulus money and unemployment rates deflation.

But he also warned that the performance of those accounts still in accommodation will determine the real consumer credit picture.

“With many accounts expected to come out of accommodation between March and May, most notably mortgage accounts, we will soon see the true impact of those programs for both consumers and the credit marketplace,” Komos said.

See related: Poll 51% of U.S. adults accrued more debt during the COVID-19 outbreak

The credit card industry might have hit its turning point

The number of consumers with access to a credit card – both cardholders and authorized users – is at a record high of 187.1 million, despite a second quarter that showed a -34.1% decline in originations.

The average debt per borrower dropped from $5,835 in Q4 2019 to $5,111 in Q4 2020, making it the third straight quarter it’s been down.

And while the number of total credit cards decreased from 454.7 million in Q4 2019 to 452.8 million in Q4 2020, the serious borrower level delinquency rate also went down from 2.18% in Q4 2019 to 1.29% in Q4 2020.

But because 2.4% of credit card account owners are still getting some kind of accommodations, delinquencies might increase when those accounts are no longer in forbearance programs.

Paul Siegfried, senior vice president and credit card business leader at TransUnion, said in a press release that although credit card balances and originations are below pre-pandemic levels, balances and rising delinquencies are starting to stabilize compared with the lows they experienced earlier in 2020.

Siegfried added that despite good news related to vaccines and progress regarding unemployment, some unknowns still exist. But he wonders how those consumers who are still receiving some type of accommodation perform.

“We anticipate delinquency rates will rise in the coming months, but they also will be coming off of extremely low, short-term levels,” Siegfried said.

See related: Credit card delinquency statistics

This expert is optimistic about the future

Ted Rossman, industry analyst at CreditCards.com, is increasingly optimistic about the future.

Credit card debt and delinquencies continue to be way down, and many consumers are likely to get three windfalls in the first quarter, he added.

There was the $600 per person stimulus payment that most people received in January, another potentially larger stimulus payment expected in March and tax refunds soon to land in most Americans’ bank accounts, Rossman said.

Rossman also said that if you take into account expanded vaccine availability, a decline in virus cases – and hospitalizations and deaths – and the anticipation of warmer weather, that there are good reasons to believe the worst is behind us.

“From a consumer perspective, I’d urge people to keep the momentum going – if you’re in a position to do so, take advantage of future stimulus payments and a tax refund to pay down your credit card debt even further,” Rossman recommended. 

See related: How your stimulus check can help you improve your credit score

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