| January 30, 2012

Late credit card payments fell considerably in 2011

The number of credit card bills that were 60 days or more behind at the end of 2011 was down considerably from the same point in 2010, as consumers continue to reduce debt.

The amount of delinquent credit card debt fell for cards issued both by banks and by retailers, according to December’s National Credit Trends Report issued by the credit monitoring bureau Equifax. Credit cards issued by banks saw the largest improvement in delinquency rates for any type of consumer credit, with the number of accounts that were 60 days or more behind on payments dropping 29 percent on a year-over-year basis. Meanwhile, the number of late retailer-issued credit cards slipped 15 percent.

The continually improving trends of delinquency and default, as well as increased consumer demand, is likely what led to both banks and retailers to begin issuing more credit cards once again in 2011. Lenders severely tightened borrowing restrictions during and immediately following the recession.

Between January and October, the most recent period for which card issuing data was available, banks saw the number of new accounts for subprime borrowers grow by 48 percent, the report said. In October, the number of new cards for these borrowers was up 22 percent over the same month in 2010. Meanwhile, the number of new credit cards issued by retailers reversed a four-year trend of declines by growing 7 percent between January and October. The total during that time reached 26.8 million new accounts.

In addition, delinquencies for other lines of credit, such as consumer finance and mortgages, also fell, the report said. Consumer finance loan delinquencies dipped 23 percent, and late mortgages fell 13 percent.

“The improvement in 2011 delinquency data, paired with consistent growth in loan originations in multiple sectors, provides truly positive momentum for the industry as we begin a new year,” said Michael Koukounas, senior vice president of analytics for Equifax. “More than 63 percent of all past due balances are from loans originated between 2005 and 2007, and as the industry continues to isolate and manage those vintages, I would expect to see continued improvement in delinquency rates as a result.”

Consumers have generally tried to limit their credit card use since the recession. But in the past few months, debt has actually started to rise as more consumers continue to feel better about their personal financial situations. Many believe they can begin dealing with debt again.

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