Credit Card Payments To Get Better Next Year
According to credit reporting agency TransUnion, credit card companies may see better credit card payment conditions come 2010. Consumers are expected to be more prudent in their credit card management next year. However, TransUnion sees that the continuing unemployment will be a major hurdle for American consumers who want to be on time with their credit card payments.
TransUnion also expects the fall of credit card delinquencies to continue next year. However, the credit reporting agency expects the rate to be much slower compared to those in the past two years. The expectation is that, when next year, 2010 ends, delinquencies on bank issued credit cards, most of which carry the Visa and MasterCard logos, will drop to 1.04%.
For the third quarter of 2009, the delinquency rate was placed at 1.1%. At the end of the year, that rate is expected to fall to 1.07%.
The predictor being used by TransUnion for upcoming credit card defaults are credit card payments that are lagging behind by three months. The company has found out that credit card holders who are already three months behind in their credit card payments find it very difficult to catch up and have higher chances of defaulting. TransUnion also collects its data from individual consumer credit reports which number at 27 million.
The expected decline in defaults for 2010 is a positive sign for the credit card industry and for the economy in general. However, the decline is actually just a fraction of the continuing decline in defaults that the credit card industry has been seeing within the past two years. Credit card delinquencies saw a peak of 1.42% during 2006′s third quarter.
TransUnion financial services group’s Ezra Becker is the director of consulting and strategy. He notes that credit card delinquencies lag behind other statistics including the unemployment rate. Until a larger number of people find employment, the credit card industry is not going to see any dramatic improvements in on time credit card payments, he says.
There is one state in the U.S. which is expected to see a rise in delinquencies in 2010 – Arizona. During the recession, Arizona was one of the hardest hit states. For 2010, delinquencies in Arizona are expected to rise to 1.34% from the forecast 1.33% it will see for the fourth quarter of 2009. Other hard hit states, Florida, Nevada and California, are expected to remain a the top of the list in delinquency statistics. North and South Dakota, are expected to remain at the bottom of the list.
