| November 15, 2011

Credit card delinquencies tick upwards in third quarter

The number of credit card delinquencies suffered by lenders nationwide ticked upwards in the third quarter of the year, but not significantly enough that the rate pulled away from near the all-time record lows.

The total number of credit card accounts that were 90 days or more behind on payments rose in the third quarter to a rate of just 0.71 percent of all balances, according to the latest study from the credit monitoring bureau TransUnion. It was the first increase in delinquent consumer credit card debt since the fourth quarter of 2009. However, the jump in delinquency was slight, and the rate is still hovering near the all-time lows observed at the end of the previous quarter.

During the third quarter, all of the 50 states, as well as the District of Columbia, saw their credit card delinquency rates increase, the report said. In addition, 89 percent of all major metropolitan statistical areas experienced a jump in late payments, up from the second quarter, when just 17 percent saw rates climb.

“This is the first quarterly increase we’ve seen in almost two years,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “Even so, we are still well below historical norms. In fact, we’re at the second lowest delinquency rate nationwide that we’ve seen in the past 16 years. … In the face of competition for prime consumers and the clear deleveraging efforts of those consumers, lenders have been gradually shifting their focus to the sub-prime market.”

During the third quarter of 2010, 23 percent of new credit card accounts were opened by consumers whose credit ratings were lower than average, and in the third quarter of 2011, that rate rose to 25.2 percent, even as the total number of new accounts remained more or less flat, the report said. Meanwhile, the number of cards opened by those with top-notch ratings slipped from 49.7 percent of all new accounts to 45.9 percent.

Though lenders would still prefer to have customers with top-notch ratings, many have also once again turned their attentions toward marketing to subprime borrowers who have been largely without credit since the depths of the recession, when issuers tightened borrowing restrictions essentially across the board.

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