Delinquency Rates Down Despite High Credit Card Usage
According to the latest TransUnion Industry Insights report, credit card usage in America is at a record high. There are 416 million credit cards in use among 175 million consumers. This is a 22% increase in the number of cards when compared to the 340 million credit cards in use during 2012.
Despite the high usage rates, delinquency rates in the first quarter 2018 are consistent with those of the first quarter of 2012 (1.78% and 1.77%, respectively). This is below the 10-year average of 1.91%.
This shows consumers are now doing a better job in managing their credit cards, even though there are more cards available. Paul Siegfried, Senior Vice President of TransUnion, says this is because:
- Credit card issuers are primarily lending to low-risk consumers.
- Issuers are providing lower credit limits to consumers in all risk brackets.
- The economy is growing as a whole, allowing consumers to pay their credit cards with minimal delinquencies.
Earlier this year, the Federal Reserve reported revolving debt, which mostly consists of credit cards, was at an all-time high of $1.023 trillion. Even though that is higher than the debt rates before the recession, the economy today is stronger than it was 10 years ago.
Americans need to continue to use their credit wisely: borrow with a realistic repayment plan, use the lowest amount of credit necessary, and pay down debts before borrowing more. This will keep delinquency rates at bay and facilitate financial success in the future.