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Credit Card Delinquencies Continue to Fall in 2Q; Average Consumer Credit Card Balances Lowest in Eight Years -- According to TransUnion

CHICAGO, IL--(Marketwire - August 25, 2010) -  TransUnion's quarterly analysis of trends in the credit card industry revealed that the national credit card delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) decreased to 0.92 percent in the second quarter of 2010, down 17.1 percent over the previous quarter. Year over year, credit card delinquencies fell by 21.3 percent.

2Q Credit Card Quarterly Statistics

  • Incidence of credit card delinquency was highest in Nevada (1.50 percent), followed by Florida (1.24 percent) and Arizona (1.11 percent). The lowest credit card delinquency rates were found in North Dakota (0.54 percent), South Dakota (0.55 percent) and the District of Columbia (0.61 percent).
  • Only one state showed an increase in credit card delinquency -- Alaska (7.4 percent increase). The two areas of the country with the largest quarter-over-quarter drop in delinquency were the District of Columbia (-28.2 percent) and Delaware (-23 percent).
  • Average credit card borrower debt (defined as the aggregate balance on all bank-issued credit cards for an individual bankcard borrower) again drifted downward for the fifth consecutive quarter nationally by 4.1 percent to $4,951 from the previous quarter's $5,165, and down 13.4 percent compared to the second quarter of 2009 ($5,719). This represented the first period credit card debt was below $5,000 since the first quarter of 2002.
  • The highest state average credit card debt remained in Alaska at $7,148, followed by Tennessee at $5,654 and Hawaii at $5,594.
  • The lowest average credit card debt was found in Iowa ($3,792), followed by North Dakota ($4,097) and West Virginia ($4,104).
  • Only three states showed an increase in average credit card debt from the prior quarter (Alaska, Oklahoma, and the District of Columbia). The largest decreases in average credit card debt over the previous quarter occurred in Alabama (-22.4 percent), Tennessee (-15.5 percent) and Mississippi (-14.2 percent).
  • On a year-over-year basis, national credit card originations dropped almost 6.5 percent. However, 12 states showed increases in originations since the second quarter of 2009. The states with the greatest year-over-year increases were Maine (27.3 percent), Ohio (18.7 percent), and Washington (15.2 percent).
  • The areas with the steepest declines in year-over-year credit card originations were Arizona (-15 percent), Georgia (-14.6 percent), and Michigan (-14 percent).
  • As credit card delinquency trends differ between the national and state economies, metropolitan areas also show different movements in the second quarter of this year. Approximately 90 percent of metropolitan statistical areas (MSAs) showed a decrease in their 90-day credit card delinquency rates since last quarter.
  • The area with the largest drop in delinquency since the last quarter was the Lewiston, ID-WA Metropolitan Statistical Area (-52.9 percent). The area with the largest increase in delinquency since last quarter was the Brunswick, GA Metropolitan Statistical Area (73.9 percent).

U.S. Analysis and Supporting Quotes
"The last five quarters of consecutive decreases in credit card balances show that consumers continue to pay down their credit cards in response to economic uncertainty and high unemployment. Many consumers view available credit as a liquidity reserve that can be drawn upon in the event of a personal hardship. We also see the impact of this pay-down effort on the later-stage delinquency side of the equation. Both the 90-day and 120-day nonpayment rates showed the largest decreases on a quarter-over-quarter and year-over-year basis since the recession began at the end of 2007."
Ezra Becker, director of consulting and strategy in TransUnion's financial services business unit.

  • As recently reported by the Commerce Department, consumers have been saving more relative to their disposable income than previously thought. The national savings rate as a percentage of disposable personal income was recently reported to be just over six percent in the second quarter of 2010 -- the highest level since June of 2009. Furthermore, according to the Federal Reserve, consumer spending and personal incomes remained flat in June.

"It appears that consumers have come to realize that material improvement in unemployment is unlikely in the short-term, and now is the time to balance saving versus spending. It remains to be seen whether this dynamic will be short term or a new paradigm for consumer behavior."
Ezra Becker, director of consulting and strategy in TransUnion's financial services business unit.

Forecast

  • At the state level, Nevada is again expected to experience the highest delinquency rate by the end of 2010 (1.6 percent) while North Dakota is anticipated to show the lowest delinquency rate (0.56 percent).

"Since the beginning of the recession, TransUnion's national and state forecasting models have tracked how credit card delinquency rates are impacted by economic factors such as median household income, consumer confidence and the U.S. savings rate. These econometric models are continuing to hold up well, as they accurately predicted the substantial drop in the 90-day credit card delinquency rate within a two percent margin of error. Based on our current economic assumptions, TransUnion believes that the 90-day credit card delinquency rate, apart from seasonal ups and downs, will continue to decrease in 2010, staying below 1.0 percent throughout the remainder of this year."
Ezra Becker, director of consulting and strategy in TransUnion's financial services business unit.

Supporting Resources/Links
TransUnion Trend Data Interactive U.S. Map
TransUnion 2Q Mortgage Statistics
TransUnion Payment Hierarchy Study
TransUnion Value of Loyalty/Delinquency Study
TransUnion on Twitter

TransUnion's Trend Data database
The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data available on TransUnion's Web site. Information for this analysis is culled from TransUnion's Trend Data and the anonymous credit files of approximately 10 percent of credit-active U.S. consumers, providing a real-life perspective on how they are managing their credit health.

TransUnion's Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion's national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels. For the purpose of this analysis, the term "credit card" refers to those issued by banks.

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.transunion.com/business

Graphics and/or photographs to accompany this release can be obtained by members of the media by contacting Cliff O'Neal at 312-985-2540 or coneal@transunion.com or Dave Blumberg at 312-985-3059 or dblumbe@transunion.com.

Contact
Dave Blumberg
TransUnion
E-mail Email Contact
Telephone 312 985 3059
Contact
Clifton M. O'Neal
TransUnion
E-mail Email Contact
Telephone 312 985 2540

Media Contacts

Consumer, Corporate and International

Clifton O'Neal
coneal@transunion.com

Credit Statistics, B2B and International

Dave Blumberg
 

 
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