Credit card debt may be flat, but delinquencies are anything but. Recently, credit card users have been paying off their balances on time and with regularity. Delinquencies just touched a new 18 year low - the lowest since 1994.
A credit card is perceived to be delinquent by lenders as soon as a borrower misses a payment for 90 days or more. According to TransUnion, a leader in credit ratings for individuals, the delinquency rate now rests at a rate of 0.63 percent. Roughly speaking, one out of 160 borrowers is delinquent on his or her credit card.
Credit card delinquencies are a major metric for issuers. A low delinquency rate usually brings about more open lending standards, higher credit limits, and improved rewards benefits for consumers. When fewer people default on their credit card accounts, credit card companies have to pass on savings and rewards to customers. The credit card industry remains one of the most competitive in the world, with credit card companies vying for every last valuable customer in the world.
Credit card delinquencies reached a new bottom while balances during the second quarter were actually 6 percent higher than the year earlier. This metric shows that delinquencies are down, as are the total number of credit cards. Credit card balances have declined in the aggregate, indicating that more money is held on fewer cards, likely because many credit cards have been paid in full and closed by the issuer or borrower.
Credit cards have become a priority over other borrowing mechanisms like home and car loans. A credit card, unlike other financing vehicles, often carries a rate in the double digits. Even at the housing peak, borrowers were able to ascertain hundreds of thousands of dollars in mortgages at rates of 6-7 percent annual interest.