Observers are nervously watching issuers’ recent results for signs of a double-dip in credit delinquencies and charge-offs.
In what may be an early sign that credit card users are again having trouble paying their bills, five of the nation’s top six credit card issuers said Monday that late payments rose in September.
That’s the first month since February 2009 that so many major companies reported upticks in payments late by 30 days or more.
The increases all were smaller than a percentage point, and card companies have seen small increases in delinquency in individual months during the last two years.
Importantly, charge-off rates continue to decline. Yet concerns are high because of persistent high unemployment and the sluggish economy. On the other hand, the cardholder base is not what it was pre-recession:
Should the September uptick be the start of a broader trend, two factors would likely temper the impact on banks.
First, fewer people have credit cards today than at the start of the Great Recession in 2007.
Many of those accounts may have been held by people with more than one credit card. But credit reporting agency TransUnion estimates about 8 million individuals dropped out of the credit card market altogether last year, either by choice or because their accounts were shut down. Those accounts that remain open have lower credit limits, as well, after banks pared back the amount they were willing to lend even to borrowers with top credit ratings.
The second factor limiting the impact on banks of rising delinquencies is that balances have fallen sharply, to $790.1 billion in August from a peak of $972.1 billion three years earlier.
Not noted is the factor of new account maturation. As issuers have cautiously returned to origination mode over the last year or so, new accounts will go through an unavoidable maturation process with increased delinquencies, no matter how carefully underwritten. But all eyes will be watching for signs of new negative trends linked to the economy.