What's Really Going On With Credit Card Delinquencies?

A TransUnion report today found that the 90-day-plus delinquency rate for credit cards climbed 11% to 1.21% in the fourth quarter of 2008. Yet, TransUnion's analyst, Ezra Becker, director of consulting and strategy in TransUnion's financial services group, saw the deteriorating performance as a positive sign for credit card finance:

"With increased unemployment rates, lower consumer confidence and less per capita disposable income, one might expect a much larger spike in card delinquency--clearly, consumers are reaching the limits of their liquidity. The fact that we have not seen such a spike is evidence of two effects: the first is that the aggressive measures financial institutions have taken to mitigate risk in their card portfolios are bearing fruit. The second is that consumers, who have lost a great deal of liquidity with the closing of home equity lines of credit and reduced card credit limits, have become more conscientious in protecting those credit instruments still available to them and are making every effort to pay their credit card bills on time. In fact, the national average [overall] credit card delinquency rate decreased 11% (1.36% to 1.21%) compared to the 4th quarter of 2007. So while it certainly does not yet signal a turnaround in the economy, the trend in card delinquency does indicates that both consumers and risk managers are actively working to control card delinquency, and are meeting with some success."

Hmm, I don't know about this. Serious delinquencies still soared last quarter. What is really going on here?

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