Credit Card Delinquencies; The Real Trends

Surveys and reports seem to give us answers to questions that we already know the answer to. Seems to me we do not need all these expensive individual surveys to uncover every single nuance.

Using a handful of basic time-tested surveys with a little common sense will get you there.

A “go to” report I have always relied on was the credit card delinquency rates. When things get bad people will pay the mortgage, rent and utility bills but credit cards go to the back of the line.

If you watch the stock market or economy you generally have a gut feeling where it is or headed without a mountain of reports. Imagine my surprise when I expected to see credit card delinquency rates in the mid 4% range instead finding it in the mid 2% range, time to take a deeper look.

With the rash of bankruptcies recently behind us it would stand to reason the credit card balances would be “new” and lower, and easier to make those monthly payments. Factor in what I call an increase in” communal homes”, kids living with their parents after college, elderly parents living with children, less expenses equal less credit card debt.

But, you knew a “but” was coming, with the huge increase in college debt and double-digit unemployment, and under-employment rate for college graduates, time to look deeper.

Overall credit card debt had its second significant quarterly increase, ending in Q4 in 2014. The last quarterly increase of 4.3% is the highest growth rate since 2008. There has been a recent increase of sub-prime consumers receiving credit cards; although it is too early to see how that segment of the credit card market will affect delinquency rates we will have to watch for an uptick in overall delinquency rates. Where there is smoke there usually is fire. The economy is in a delicate position, I know we as people who live and work in it every day know that, but do our politicians?

My advice is to be cautiously optimistic, we don’t want to be so careful, and frugal as to help stifle the economy but at the same time we have to protect ourselves because they won’t.

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