Credit Card Delinquency Rises – Another Crisis?

In 2009, we saw some of the largest amounts of credit card delinquencies in a long time and it looks like there are still some stragglers out there. This week TransUnion, a credit-monitoring agency, reported that in Q3 2011 the US saw an increase in credit card delinquency rate of .71%. Even though the rate rose, it remains the second lowest it’s been in 16 years.

“This is the first quarterly increase we’ve seen in almost two years,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit.

Does this mean that we are getting ready for round two of the financial crisis that plagued our country in 2009 and 2010? More than likely not. This just shows that banks are starting to lend money to those consumers that need credit. These sub-prime consumers need a little “breathing room” and until now, it’s been hard to find. The entire economy will benefit from the increased use of credit cards. Next time you go to the store and buy something on credit, imagine how many workers touched that product.

“We find card delinquency being driven by a number of factors. One such driver is the changing risk profile of consumers opening new credit card accounts. In the face of competition for prime consumers and the clear deleveraging efforts of those consumers, lenders have been gradually shifting their focus to the sub-prime market.”

With unemployment the way it is right now, consumers need something to help them make ends meet. If that means consumers have to get a credit card, then that’s great. However, those consumers still have to be responsible and pay their bills. Paying the minimum balance each month will NOT hurt your credit.

Alabama, Mississippi, and Nevada lead the way in the Q3 delinquencies. These states have a large population of lower income families. Alaska, North Dakota, and South Dakota have the lowest number of delinquencies.

Although I don’t think that this is a sign of something bad happening immediately, if the unemployment rate and consumers start running out of financial options, it’s only a matter of time before we are right back to the dark days of 2009.