Credit Commentary

Credit Cards Payment Study

By Zarana on Monday, July 06 2009

With deteriorating outlook of economy, rising credit crunch in recent months, with unemployment topping 9.5% in May’09 – more and more borrowers are facing problems paying their credit card bills.

Revolving credit, a close approximation of credit card debt, totaled $939.6 billion in March. The Federal Reserve reported that 6.5 percent of credit card debt was at least 30 days past due in the first quarter, the highest percentage since it began tracking the number in 1991. The amount being written off was also at peak levels.

Nationally, the bankcard delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their bankcards) increased to 1.32 percent in the first quarter of 2009, up 9.1 percent over the previous quarter. Year over year, bankcard delinquencies increased 11 percent from 1.19 to 1.32 percent.

As seen in the chart, the payment rate for securitized credit card loans has declined significantly for most of the credit card issuers over the year.

A Fed program to lend up to $200 billion to holders of ABS backed by new or recently issued consumer loans is expected by analysts to boost availability of loans for autos, education and credit card balances.

In addition, the report comes amid new restrictions on credit-card companies that would ban extra fees and fluctuating rates. The legislation is expected to bite into industry profits.