Credit card delinquencies are expected to drop sharply again in 2011, continuing a large decline that began in the second half of 2010, the credit bureau TransUnion LLC has predicted.
Delinquency rates have dropped dramatically since peaking in the first quarter of 2009, when balances on about 1.21% of all cards were 90 days or more past due. With consumers being more careful about how they use credit, TransUnion said on Tuesday, it expects card delinquencies to drop to 0.75% by the end of 2010, with the rate falling even further next year and ending 2011 at about 0.67%.
The expected decline will come partly from reductions in "chargeoffs in the higher-risk segments" and because of "more conservative spending in the low-risk segments," according to TransUnion.
"Many factors have influenced the way consumers view and utilize credit card credit, including the Credit CARD Act, which has shifted the way lenders market and price this instrument," said Ezra Becker, TransUnion's vice president of research and consulting. Other factors include the payment-hierarchy flip consumers displayed this year, in which they paid credit card bills before their mortgages; dramatic increases in the volume and duration of unemployment and home-value depreciation, he said.
Tighter lending standards also are playing a role. More than 8 million people have dropped off credit card rolls in the past year, many because their cards were cut off by banks. Seventy-eight million U.S. consumers do not have credit cards, compared to 70 million a year ago.
Because of the recession, banks are less likely to open accounts for people with troubled credit histories, TransUnion reported.
It said it expects every state to see further declines in 90-day credit card delinquencies next year, led by Mississippi, which has a 13.67% delinquency rate, North Carolina at 13.09% and Kentucky at 12.88%.
