*EDITORS: ABA Chief Economist James Chessen can be scheduled for interviews by calling 202-663-5439.
WASHINGTON – Bank card delinquencies declined significantly in the first quarter, falling 16 basis points to 2.44 percent of all accounts as consumers continue to improve their financial situations, according to results from the American Bankers Association’s Consumer Credit Delinquency Bulletin. Delinquencies for bank cards are well below their 15-year average of 3.82 percent.
This news comes after ABA’s Credit Card Market Monitor found that an increasing number of credit card users are using their cards as a transactional tool rather than as a form of debt.
“Bank card delinquencies remain at surprisingly low levels even as credit card spending increases,” said James Chessen, ABA’s chief economist. “More and more consumers are using their credit cards as a payment vehicle, paying off or paying down their balances each month.”
Following two quarters of record lows, the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, edged slightly higher in the first quarter, rising 4 basis points to 1.63 percent of all accounts - - well under the 15-year average of 2.33 percent. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
Chessen noted that consumers continue to responsibly manage their finances, and are better able to manage their debt as the economy improves.
“Consumers have a greater capacity to meet their financial obligations due to an improving economy, low interest rates and the significant deleveraging they’ve done in recent years,” said Chessen. “A disciplined approach to managing debt has helped people improve their financial positions, keeping delinquencies near historical lows.”
While home equity loan delinquencies rose 9 basis points to 3.57 percent of all accounts, home equity line delinquencies continued their downward trend, falling another 10 basis points to 1.57 percent of all accounts in the first quarter.
“Home equity line delinquencies have fallen back to what they were five years ago,” said Chessen. “This is a positive trend in light of the number of home equity lines that will move into the fully amortizing period over the next several years, raising the monthly payment obligations for some borrowers.”
Chessen believes that while delinquencies may vary slightly in the months ahead, they are likely to remain near their current levels.
“In the wake of significant consumer deleveraging, delinquency rates have reached a cyclical low,” Chessen said. “With an improving economy and continued consumer vigilance, we expect delinquency rates to fluctuate at this lower end of the range for the foreseeable future.”
The first quarter 2014 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
- Personal loan delinquencies rose from 1.70 percent to 1.73 percent.
- Direct auto loan delinquencies fell from 0.79 percent to 0.76 percent.
- Indirect auto loan delinquencies rose from 1.62 percent to 1.74 percent.
- Mobile home delinquencies fell from 3.75 percent to 3.37 percent.
- RV loan delinquencies rose from 1.10 percent to 1.14 percent.
- Marine loan delinquencies rose from 1.36 percent to 1.42 percent.
- Property improvement loan delinquencies fell from 1.07 percent to 1.00 percent.
- Home equity loan delinquencies rose from 3.48 percent to 3.57 percent.
In addition, ABA tracks three open-end loan categories:
- Bank card delinquencies fell from 2.60 percent to 2.44 percent.
- Home equity lines of credit delinquencies fell from 1.67 percent to 1.57 percent.
- Non-card revolving loan delinquencies fell from 1.80 percent to 1.79 percent.
For borrowers having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems. Proven tips are listed below. Additional consumer information on budgeting, saving, managing credit and more is available at ABA.com/Consumers.
- Talk with creditors – the sooner you talk to them, the more options you have;
- Don’t charge more purchases until your problems are solved;
- Avoid bankruptcy – it’s a short-term solution with long-term consequences; and
- Contact Consumer Credit Counseling Services at 1-800-388-2227.
- Indirect auto loan: loan arranged through a third party such as an auto dealer.
- Direct auto loan: loan arranged directly through a bank.
- Delinquency: late payment that is 30 days or more overdue.
- Bank card: a credit card provided by a bank.
- Closed-end loan: a loan for a fixed amount of money with a fixed repayment period and regularly scheduled payments.
- Open-end loan: a loan with a fixed amount of available credit but a balance that fluctuates depending on usage such as a line of credit.
The American Bankers Association is the voice of the nation’s $14 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $11 trillion in deposits and extend nearly $8 trillion in loans.