Consumers’ outstanding credit card debt rose incrementally during the third quarter, while the proportion of consumers falling behind on their monthly card-account payments rose for the first time in nearly two years, according to a report TransUnion LLC released Nov. 15.
Issuers during the third quarter also approved more new sub-prime card accounts, which likely drove up delinquency rates, a TransUnion analyst suggested in a press release.
The average amount of U.S. individual card debt during the quarter ended Sept. 30 was $4,762, up 1.3% from $4,699 during the previous quarter but down 4.1% from $4,964 a year earlier.
States with the high average individual card debt during the third quarter were Alaska, with $6,980; North Carolina, with $5,464; Colorado, with $5,378; and Georgia, with $5,308.
States with the lowest average card debt were Iowa, with $3,770; North Dakota, with $4,078; South Dakota, with $4,090; and Wisconsin, with $4,156.
The largest card-debt increase occurred in Washington, D.C., where the average credit card debt at the end of September rose 1.3%, to $5,023 from $4,960 a year earlier.
The state with the largest year-over-year decline was Tennessee, where the average card debt level at the end of September fell 16.8%, to $4,644 from $5,583.
The percentage of consumers falling behind on card payments also rose 11 basis point during the third quarter, to 0.71% from 0.6% during the second quarter, but it was down 12 basis points from 0.83% during the same period a year earlier, the data show.
“This is the first quarterly increase (in the delinquency rate) we’ve seen in almost two years,” Ezra Becker, TransUnion vice president of research and consulting, said in a press release. “Even so, we are still well below historical norms.”
One reason delinquency rates rose is issuers’ new strategy of “gradually shifting their focus to the sub-prime market,” Becker said.
During the third quarter, 25.2% of new credit card accounts went to consumers with a VantageScore lower than 700 compared with 23% that did a year earlier, Becker said. VantageScore measures consumers’ creditworthiness on a sale from 501 to 990.
Over the same period new cardholders’ credit scores rose, the volume of new credit cards remained flat because of turnover, Becker said. And the proportion of newly approved cardholders with VantageScores of 800 or more dropped to 45.9% from 49.7%, he said.
“When more high-risk customers are opening cards and fewer low-risk consumers are doing so, it is inevitable that delinquency rates will increase,” Becker said.
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