LOS ANGELES, Calif. – Many Americans took on more credit card debt and failed to make timely payments in the final quarter of 2013, when consumers typically crank up spending on holiday shopping.
Even so, the national late-payment rate remained close to its lowest level in six years, credit reporting agency TransUnion said Tuesday.
The rate of credit card payments at least 90 days overdue was 1.48 per cent in the October-December quarter. That’s up from 1.36 per cent in the previous three-month period, but down from 1.61 per cent in the fourth quarter of 2012, the firm said.
Average card debt per borrower rose 1.7 per cent from the third quarter to an average of $5,325. It slipped 1 per cent from a year earlier.
A sequential uptick in late payments and card balances is common in the fourth quarter, which coincides with the holiday shopping season. Many consumers use cards to supplement their spending and often put off making timely payments until the following year.
The latest card delinquency rate remains below the average rate of about 2.2 per cent going back to 2007. The lowest card payment rate on the firm’s books was set in the second quarter last year at 1.27 per cent. The firm draws its figures from data culled from virtually every U.S. consumer who uses credit.
TransUnion projects the credit card delinquency rate will increase to around 1.57 per cent in the January-March period.
Borrowing on credit cards plunged after the Great Recession as financial institutions tightened lending standards and households became more cautious about taking on high-interest debt at a time when millions of people were losing their jobs.
But over the past year, consumers have become more confident and have been willing to take on debt. Most of those gains have come in the category that covers auto and student loans, but credit card borrowing has been rising, if more slowly.
Credit card debt climbed by $5 billion December, the largest jump since May, according to the Federal Reserve.
Regardless, credit card debt is still 15.7 per cent below its peak above $1 trillion reached in July 2008. Credit card debt in December stood at $861.9 billion, up just 1.9 per cent from a year ago, according to the Fed.
Meanwhile, the number of new credit card accounts opened by consumers increased 11 per cent to just under 12 million in the third quarter from a year earlier. The data lag by a quarter, so the latest TransUnion figures cover the July-September period.
While the numbers indicate lenders are signing up more borrowers to new credit cards accounts, the number of credit card accounts trails levels last seen before the 2008 financial crisis.
“There are still at least 40 million fewer credit card accounts active in the marketplace than what we observed just five years ago,” said Ezra Becker, vice-president of research and consulting at TransUnion’s financial services business unit.
TransUnion’s data also suggest that there is a reduced demand for new credit by borrowers with the highest, or prime, credit scores.
Becker points to industry reports showing that direct mail solicitations for new credit grew by about 30 per cent last year, but new card accounts only rose about 11 per cent in the same period.
“In short, consumers are managing the cards they have in their wallets effectively and do not seem to be seeking additional card credit at this point,” Becker said.