Bank card delinquencies fell 26 basis points to 3.62% of all accounts, the lowest mark since the first quarter of 2001 and far below the 15-year average of 3.93%, according to a report released last week by the American Bankers Association.
James Chessen, ABA's chief economist, said part of the reason card delinquencies are down is because banks continue to write off loans that have not been repaid, but also because consumers are being careful about spending. A delinquency is defined in the report as a late payment that is 30 days or more overdue.
"Consumers continue to focus on reducing debt levels, using credit cards less, and building savings," he says. "This is very positive, but the fundamental story is the same: it's all about jobs. When people don't have jobs, they can't pay their bills. High numbers of unemployed workers and slow job growth continue to paint a picture of financial stress for many households," he says.
The total consumer loan delinquency rate rose slightly from 2.98% to 3% in the second quarter, the first increase in four quarters. Loan categories showing growing signs of stress include mobile home loans, where delinquencies rose 36 basis points from the previous quarter to 4.01%, and marine loans, up 27 basis points to 2.2%.
"The economic momentum over the last few quarters seems to be losing steam," ABA Chief Economist James Chessen said in a statement. "This will affect job creation and the ability of consumers to pay off debt. I think delinquencies will continue to improve but at a slower pace, reflecting a struggling economy."
The overall consumer loan delinquency rate had been dropping steadily since hitting 3.35% in the second quarter of 2009.
What do you think about this? Send us your feedback.
