Increased credit card delinquency trends signal potential problems for consumers

Credit delinquencies continue to be a problem for a large number of U.S. consumers. A delinquency is recognized as a missed payment 30, 60, or 90 days past due. While mortgage, student, and auto loan delinquencies persist, credit cards are playing an increasingly large role in overall delinquencies. In August, the Federal Reserve Bank of New York reported credit card balances moving into the 90+ day delinquency mark rose from 5.0% in Q1 of 2019 to 5.2% in Q2. The Fed also reported this continues an “upward trend” that started in 2017.

Overall, U.S. consumers currently owe approximately a whopping $868 billion in credit card debt. While down from the $1 trillion owed in Q1, some alarming credit card debt trends are emerging.

Delinquency rates rapidly rising for younger consumers

In 2012, the Federal Bank of New York reported 41% of 20-something consumers possessed credit cards. Fast forward to today, and that number has jumped to 52%. This is an important factor when looking at overall consumer credit card delinquencies. While credit delinquency took a dip in the Q1 this year, according to a recent report by the Wall Street Journal, credit card delinquency persists, especially for consumers in the 18 to 29 age group. First-quarter results in 2019 showed approximately 8.1% of credit card balances held by younger consumers were delinquent by 90 days or more—the highest share since 2011. Statistics indicate credit card delinquency rates are rising for older consumers as well, but not nearly at the same pace.

Credit card interest rates not dropping

One of the significant problems consumers face is the fact credit card lenders are not decreasing interest rates as other rates drop. Several sources indicate credit card interest rates are at their highest since the mid-to-late 1990s. Rates can range anywhere between an average of 17% up to more than 25%. High-interest rates significantly contribute to consumers further being unable to pay their credit card debt because it places them in a never-ending cycle since it’s difficult for them to catch up.

How credit delinquencies affect credit standing

Delinquencies, which negatively affect consumer credit reports and scores, have other significant impacts for people falling behind in their payments.

• Impacts an ability to take out mortgages or car loans
• Affects eligibility to qualify for small business loans
• Influences a landlord’s willingness to rent an apartment
• Results in lenders offering higher interest rates

These are only a handful of ways a negative credit standing can affect consumers

Credit card delinquencies are on the upswing and the numbers show people steadily increased their credit card spend this past July, long before the traditional “real” spending takes place during the holiday season. Analysts are concerned about what will happen come winter when people typically begin to accumulate larger credit debt.

If you’ve recently experienced credit delinquency and want to rebuild your credit rating or if you simply want to strengthen your overall credit standing, PRBC can help. To find out how you can obtain a free alternative credit score or learn more about our services, contact us today.