TransUnion, an agency focusing on credit reports, released a report last Monday that indicated that credit card delinquencies are on the rise based on numbers from the first quarter.
According to the report, the delinquency rate for credit cards was at 11% higher than the previous year. Compared to the previous quarter, it was up by 9.1%. The delinquency rate is the rate of credit card borrowers who are delinquent in their payments by 90 days or more.
The first quarter is significant, as it is the time when consumers get their tax refund checks. Usually, credit card companies can expect better debt payment rates from customers during the first quarter, as consumers use their tax refunds to pay off debts. However, as the employment slows down and mass layoffs and pay cuts become more and more common, consumers are losing disposable cash. Most of the year's tax refund checks are probably going to payments for necessary expenses.
“This increase could be an indication that tax refund checks, typically used to pay balances in during the first quarter in years past, are now being used to cover daily living expenses,” Ezra Becker from the financial group of TransUnion stated.
The report from TransUnion also points that borrower debt average also increased by 4.09% compared to figures from the previous year. According to the report, the average borrower owes $5,729 in debt.
Currently, the report puts the delinquency rate at 1.32%. As the economic downturn continues, TransUnion says they expect the rise of the 90-day delinquent debts to continue and that by the end of 2009; it will be at or near 1.7%.
There is still some hope that the stimulus programs of the government will salvage the economy and bring up the employment rates. Depending on whether this would work or not, the increase of delinquencies could peak by late 2010 or by early 2011.
There are also other factors at play which could change the current trend. The report stated that delinquency rates also depend largely on the new credit card bill and other related legislations and how it will affect credit card companies and consumers as well.
TransUnion's reports are taken from data collected from 27 million anonymous, individual credit files.