Monday, May 17, 2010

Credit Card Delinquencies Fall 4th Straight Month and Credit Card Debt Falls to 45-Mo. Low in March

(Reuters) - "U.S. credit card delinquencies fell for the fourth straight month in April, the latest indicator that Americans are recovering from the worst economic downturn since the Great Depression. While charge-offs remained high, delinquencies are a better gauge of future loan performance. With fewer consumers late on their bills, the outlook for credit losses over the summer may be improving."

HT: Benny The Man and Junkyard Hawg

Update: See chart above showing that revolving consumer credit (credit card debt) fell in March to a 45-month low of $852.6 billion, the lowest level since July 2006.


At 5/17/2010 1:00 PM, Blogger Junkyard_hawg1985 said...

That is indeed good news. The even better news is that overall revolving credit debt has plummeted from $958.1 billion at the end of 2008 to $852.6 billion today.

At 5/17/2010 1:14 PM, Anonymous Benny The Man said...

Not every day brings unalloyed good news, but as Dr. Perry's relentless posting bears out, most days are bringing mostly good news.

At 5/17/2010 1:44 PM, Blogger Unknown said...

I see that the talk of a gold bubble is coming up again. Here's some interesting points on it from David Rosenberg:

At 5/17/2010 2:59 PM, Anonymous Anonymous said...

More evidence that the government is out of touch. People have prudently cut spending and cut debt.

The know-it-alls in DC increase spending, prop up state governments so they don't have to cut, increase regulation, pile up the debt to hand to us later, and actually want to triple down on more spending.

If this weren't real life, it would be comical.

At 5/17/2010 3:47 PM, Anonymous Anonymous said...

It is actually "mixed" news. The delinquencies will naturally follow the balances of credit card receivables. What is happening, is that consumers, as a whole, are rejecting the notion of financing their asset purchases with debt, per se. This means that overall demand for consumer goods (and probably also all good, capital and consumer) is down, and will likely stay down as long as the populace remember this debacle, and feel this way.

At 5/17/2010 4:30 PM, Anonymous Anonymous said...

What's actually happening is that millions of people have stopped paying their mortgages and are instead paying down their credit card debt:

Credit history company TransUnion has found that Americans are shifting their priorities when it comes to paying down debt.

Consumers are paying down their credit cards while ignoring their mortgage payments.

The company's most recent study found that a rising percentage of Americans are current with their credit cards but delinquent on their mortgage payments.

At the same time, a falling percentage are delinquent on their credit card while current on their mortgage ...

In the end you think you can just walk away from a mortgage, then why rush to pay it down. Moreover, credit card debt usually carries far higher interest rates than a mortgage, so in fact one wonders why this is even a new trend.


At 5/17/2010 4:33 PM, Anonymous Anonymous said...

Skip the mortgage, pay the credit card, CNNMoney

At 5/17/2010 4:46 PM, Anonymous Titus Pullo said...

Attendance for yesterday's NASCAR race at Dover, Delaware (Vice President Biden's home state) was down yesterday. Officials said the attendance at the 140,000 capacity "Monster Mile" raceway was 88,000. Others believe that estimate is high by 10,000. NASCAR officials attribute the decline at Dover and other race tracks to the economy.

At 5/17/2010 5:36 PM, Anonymous grant said...

Yep!!!the MP's, seem to be on a winner!

At 5/17/2010 6:17 PM, Blogger PeakTrader said...

Banks have been canceling credit cards:

Chase suddenly canceling credit cards
August 12, 2009

"We're seeing enormous amounts of credit limits disappear without warning and taking some consumers by surprise," said Joe Ridout from Consumer Action.

Ridout said banks are closing credit card accounts because of the poor economy as delinquencies go up and high unemployment makes customers more risky."

At 5/17/2010 6:20 PM, Blogger PeakTrader said...

No credit, no delinquencies.

At 5/17/2010 6:28 PM, Blogger PeakTrader said...

Here's a date that matches the beginning of the decline:

The New York Times
Banks Trimming Limits for Many on Credit Cards
June 21, 2008

"The easy money that led Americans to depend on credit cards to pay their bills is starting to dry up.

After fostering the explosive growth of consumer debt in recent years, financial companies are reducing the credit limits on cards held by millions of Americans, often without warning.

Banks that issue cards like Visa and MasterCard, as well as the American Express Company, are cutting the limits for customers who have run up big debts, live in areas that have been hit hard by the housing crisis or work for themselves in troubled industries.

The reductions come as consumers, squeezed by a slack economy, a weak housing market and rising unemployment, are falling behind on monthly credit card payments in growing numbers."

At 5/17/2010 6:42 PM, Blogger Don Culo said...

Remember when George W. Bush was on televiosn saying spend, spend, spend?

We can all thank Obama for telling Americans to save, save, save. We all now see the results.

At 5/17/2010 6:48 PM, Anonymous Anonymous said...

Banking analyst Meredith Whitney suggested in an op-ed in WSJ and CNBC today that credit card issuers are cancelling cards for higher risk customers. These customers fall out of this statistic, thus leaving more credit-worthy customers. The credit-worthy customers are paying down debt which makes the statistic look better. Credit card issuers are dropping the high-risk customers as a result of the new regulations our stupid politicians passed this spring.

At 5/17/2010 6:56 PM, Blogger Paul said...

"We can all thank Obama for telling Americans to save, save, save. We all now see the results."

This is a joke, right?

At 5/17/2010 7:00 PM, Blogger PeakTrader said...

Anon states: "The credit-worthy customers are paying down debt which makes the statistic look better."

How do you know that? It's possible the decline in credit and delinquencies are from credit cards being canceled, lower credit limits, and new applicants being rejected exceeding credit worthy card holders building-up debt.

At 5/17/2010 7:06 PM, Blogger PeakTrader said...

More people not paying credit-card bills
January 15, 2010

"JPMorgan Chase is writing off $1.4 billion worth of consumer loans in the fourth quarter, and Capital One is writing off more than 10% of its loans. More and more people are walking away from their credit-card bills. Stacey Vanek-Smith reports."

At 5/17/2010 8:20 PM, Anonymous Anonymous said...

How do you know that?

Try this.

The money quote: The upshot of all this is that the record decline in commercial bank loans/leases that the U.S. experienced in 2009 was dominated by pay-downs of loans rather than write-offs. Pay-downs have negative implications for new aggregate demand whereas write-downs are irrelevant (at least directly) with regard to new aggregate demand.

At 5/17/2010 8:28 PM, Blogger Unknown said...

How accurate are these numbers? If this is true how will this affect the economy and how long?

Cyrus Jeffries
Scotty Cameron Putter

At 5/17/2010 9:02 PM, Blogger Bill said...

I can report that the lack of easy credit has certainly harmed my business as many customers have cited credit card lines being reduced or eliminated as a reason for not spending as much as they had previously. I can certainly imagine that this reduction in available credit is having a similar depressing effect elsewhere in the economy. Even creditworthy people have less freedom to operate in this environment.

At 5/17/2010 10:11 PM, Blogger PeakTrader said...

Anon, that data aren't relevant to credit card debt. Here are some relevant data:

Credit Card Debt Statistics
Hoffman Brinker & Roberts
(updated November 2009)

"Eighty-eight million accounts and credit lines, representing $751 billion in credit, have been closed since September of 2008.

In September 2008 credit card debt hit an all-time high of $975 billion. Banks shed nearly $76 billion in card account balances over the 11 months preceding August 2009. The Fed said the total outstanding credit card debt at the end of August 2009 was $899 billion.

Charge-off rates in January 2009 were 40% higher than a year ago at 7.5% and were expected to approach 9% during the second half of 2009."

Charge-off rate:

"The charge-off rate is the amount of charge-offs divided by the average outstanding credit card balances owed to the issuer. Charge-off is actually an accounting term that means a company has decided it has no chance to collect a debt and charges it off its books. A rising charge-off rate is a sign of an economy under stress."

Fed report: Consumer credit card balances keep plummeting

"At the end of 2008, Americans held $957.3 billion in credit card debt. At the end of 2009, that number fell to $866 billion -- a total decrease in debt of more than $91 billion."

At 5/17/2010 11:43 PM, Blogger Ron H. said...

>"Here's a date that matches the beginning of the decline:"

Are they trying to 'hide the decline' ?

Oh. Sorry, that was a different blog.

At 5/18/2010 1:23 AM, Anonymous Anonymous said...

Don Culo said...

Remember when George W. Bush was on televiosn saying spend, spend, spend?

No, because he never said that. It was a columnist who said that. But perhaps you taped the moment he was on tv saying that.


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