CHICAGO (5/29/13)--The national credit card delinquency rate--the ratio of borrowers 90 or more days past due--decreased to 0.69% in the first quarter from 0.73% a year earlier, according to the most recent TransUnion report.
"We traditionally see credit card delinquencies and balances decline during the first three months of the year as many people pay down their holiday shopping balances or use their tax refunds to pay off their debts," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit.
"In addition to the seasonal quarter-over-quarter drop, the year-over-year improvement in credit card delinquencies is indicative of how consumers continue to value their credit card relationships," Becker said.
The delinquency rate experienced a steep 18.8% seasonal decline from the end of 2012, when it stood at 0.85%, said the Chicago-based global company that specializes in information gathering and risk management.
At credit unions, members' 60-plus-day delinquency rate declined to 1% during March from 1.1% in February, according to the Credit Union National Association's March monthly sample of credit unions.
Average credit card debt per borrower also dropped 1.7% to $4,878 in the first quarter from $4,962 in first quarter 2012, said TransUnion. On a quarterly basis, card debt decreased 4.8% from $5,122 in the fourth quarter.
Since the beginning of the recession at the end of 2007, the credit card delinquency rate has declined five out of six first quarters on a quarterly basis. The average first-quarter decline for that timeframe has been 7.2%.
Twelve states saw their delinquency rates rise year over year, with Massachusetts and North Dakota the only ones to experience double-digit basis point increases--and those from low starting points.
Sixty-five percent of metropolitan statistical areas (MSAs) experienced declines in their respective delinquency rates in first quarter relative to one year ago. That is improved from the previous quarter, when only 33% of MSAs experienced year-over-year decreases. Some MSAs experiencing the largest year-over-year decreases in the first quarter included: Seattle (28.1% decline to 0.41%), Denver (26.9% decline to 0.49%) and Salt Lake City (22.6% decline to 0.48%).
The TransUnion quarterly analysis of credit card performance also examines origination rates, which are evaluated one quarter in arrears to account for the reporting lag of new accounts.
In the fourth quarter, new credit card originations dropped 1.6% relative to fourth quarter 2011 (to 7.57 million from 7.70 million accounts). The share of non-prime, higher-risk originations (with a VantageScore 2.0 credit score lower than 700 on a scale of 501-990) was 28.14% in the fourth quarter, slightly below 28.38% in fourth quarter 2011, but higher than the 27.72% in fourth quarter 2010.
"Though fourth-quarter credit card originations had dropped compared to the prior year, the number of new credit cards entering the marketplace is still significantly greater than what we saw just a few years ago," Becker said.
TransUnion forecasts credit card delinquencies to increase slightly to roughly 0.71% in the second quarter, based on current economic assumptions.