Credit card delinquency rate decreases in the 2nd quarter of 2009

A research carried out by TransUnion, one of the major credit bureaus, reveals the fact that the credit card delinquency rate has dropped to about 1.17% in the second quarter of 2009. In comparison to the first quarter, the delinquency rate has dropped by about 11.36%. The percentage includes those customers who are 90 days or more delinquent on their credit card/cards. However, the rate has increased by 12.5% in comparison to the second quarter of 2008.

TransUnion carries out this quarterly research by analyzing 27 million consumer credit records that are randomly selected from the database of the credit bureau. The percentage of the credit card delinquency rate resembles to what TransUnion predicted in the first quarter of 2009.

Credit card delinquency rate: The state-wise statistics

No US state has experienced a quarterly increase in credit card delinquency rate in the 2nd quarter of 2009. Till date, the credit card delinquency rate has been highest in the US state of Nevada (2.19%), which has been closely followed by Arizona and Florida with delinquency rate of 1.52% and 1.64% respectively. North Dakota, South Dakota and Alaska has shown lowest delinquency rate of 0.69%, 0.77% and 0.71% respectively.

In the second quarter of 2009, the average credit card borrower debt has decreased from USD 5,776 to USD 5,719. However, the figure has increased by 1.74% in comparison to the second quarter of 2008. In 2009, the highest recorded credit card debt has been in Alaska (USD 7,665), which has been closely followed by Tennessee (USD 7,054) and Nevada (USD 6,517). The lowest credit card debt has been recorded in Iowa at USD 4,247.

Possible reasons behind the drop in the delinquency rate

Historical trends reveal that credit card delinquency rate routinely drops after the first quarter. According to Ezra Becker, the director of consulting and strategy in TransUnion’s financial services group, the recent drop in the delinquency rate may be the result of seasonal fluctuations rather than a noticeable turnaround in the consumer non payment behavior in respect to credit cards.

The other possible reason may be the recently enacted Credit Card Reform Act. According to this Act, credit card issuers will have to change certain strategies, which will lead to changes in consumer behavior, though most of the strategies are still unknown. However, it is assumed that the lending environment will be dramatically different in the forthcoming days as the issuers will offer more competitive and profitable credit cards to the consumers.

TransUnion forecasts that the 90-day credit card delinquency rate will be about 1.2% in the last quarter of 2009. However, if the unemployment rate continues to drop more, then the delinquency rate is expected to drop at the beginning of 2010. Recent researches reveal that the unemployment rate has dropped to 9.4% in the monthly of July 2009. According to TransUnion, the credit card delinquency rate will drop even more if the stock market continues to rise in the forthcoming days.