Thursday, May 24, 2012

Credit Card Delinquency Rate Falls to Record Low; Household Fin. Obligation Ratio Lowest Since 1984

The Federal Reserve released new data today on delinquency and charge-off rates at U.S. commercial banks for the first quarter of 2012. For consumer credit cards, the delinquency rate fell for the 11th consecutive quarter to 3.07% during the January-March period, which is the lowest level ever recorded since the Federal Reserve started tracking these data back in 1991 (see blue line in chart).

For all consumer loans, the first quarter delinquency dropped to 2.89%, the lowest rate since the 2.8% reading in the first quarter of 2006, well before the recession started (see red line in chart).

Delinquency rates for all consumer loans and credit card debt are both back to pre-recession levels, and credit card delinquencies are at the lowest level ever recorded.  Likewise, the charge-off rates for all consumers loans and credit card loans are both back to pre-recession levels (data here).

The drops in delinquency and charge-off rates for consumer debt are consistent with the drops in the household debt service ratio (required payments on mortgage and consumer debt as a share of disposable personal income) in Q4 last year to 10.88% (red line in chart below), the lowest since 1993; and the drop in household financial obligations ratio (adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments to the household debt service ratio) in Q4 to 15.93%, the lowest since 1984. 

MP: U.S. households appear to be managing debt better than at almost any time during  the last 20 years, in terms of a record-low delinquency rate on credit card debt, a return of the delinquency rate on all consumer debt to pre-recession levels, and the lowest share of monthly disposable income in almost 20 years going towards monthly car loans/lease payments, monthly mortgage/rent payments, and monthly credit card payments in almost 20 years. 


At 5/24/2012 6:18 PM, Blogger misterjosh said...

I can think of some other reasons that the credit card delinquency rates might be low. The recent consumer protection laws made the most delinquent debtors into unprofitable customers and so they were dropped from the rolls.

At 5/25/2012 10:31 AM, Blogger Henry H said...

The chart with data through 2012:4Q must be mislabeled. My guess is 2011:4Q or 2012:1Q.


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