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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Credit Card Delinquency Spikes

The delinquency rate for bank-issued credit cards jumped 11 percent in the first three months of this year, credit-rating agency TransUnion said this morning.

The percentage of credit card customers who are three or more months past due on their bills jumped from 1.19 percent to 1.32 percent in the first quarter, TransUnion said. This includes holders of Visa, MasterCard, American Express and Discover cards.

Even though that increase doesn't sound serious, the growing credit card default crisis is. Many economists expect the next wave of credit problems to come from massive credit card defaults. In other words, just as the banks are starting to get a little healthier from the bad-mortgage fiasco, their balance sheets will get hit with credit-card defaults, crushing earnings.

Further, even though job losses slowed last month, the overall unemployment figure continued to rise, and is now up to 9.4 percent. As unemployment continues to rise, you can expect more credit card defaults.

Also in the first quarter of this year, the average total debt on bank cards rose to $5,776 from $5,548 last year.

Though first-quarter balances typically jump because of holiday spending, that's not the case this year because of the significant decline in last year's Christmas retail results.

TransUnion, Equifax and Experian are the three credit-rating agencies that monitor your credit activities and set your credit score, which determines, for instance, the rate you can get on a mortgage.

-- Frank Ahrens
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By Frank Ahrens  |  June 8, 2009; 11:08 AM ET
Categories:  The Ticker  | Tags: american express, credit cards, equifax, experian, mastercard, transunion, visa  
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Comments

The jump in the delinquency rate from 1.19 to 1.32 is suspiciously low. Given the propensity of most people to having multiple credit cards, could it be that they are steadily increasing balances as they shift funds between cards to meet minimum repayments? The 6% increase in the average amount outstanding despite flat retail sales performance might support this contention.

Posted by: psouleles | June 8, 2009 3:25 PM | Report abuse

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