TransUnion.com: Average Credit Card Delinquency Rates Decrease in All 50 States and D.C. From Previous Quarter

CHICAGO, IL–(Marketwire – TransUnion.com released today the results of its analysis of trends in the credit card lending industry for the second quarter of 2009. The report is part of an ongoing series of quarterly consumer lending sector analyses focusing on credit card, auto loan and mortgage data available on TransUnion’s Web site at www.transunion.com/trenddata. Information for this analysis is culled quarterly from approximately 27 million anonymous, randomly sampled, individual credit files, representing approximately 10 percent of credit-active U.S. consumers and providing a real-life perspective on how they are managing their credit health.

Statistics

As TransUnion predicted last quarter, the national credit card delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards) fell to 1.17 percent in the second quarter of 2009, down 11.36 percent over the previous quarter. Year over year, credit card delinquencies increased 12.5 percent from 1.04 percent. Incidence of credit card delinquency was highest in Nevada (2.19 percent), followed closely by Florida (1.64 percent) and Arizona (1.52 percent). The lowest credit card delinquency incidence rates were found in North Dakota (0.69 percent), Alaska (0.71 percent) and South Dakota (0.77 percent). Kentucky saw the largest quarter-over-quarter drop of 18.2 percent in credit card delinquency. In fact, no state experienced a quarterly increase in delinquency rates in the second quarter of 2009.

Average credit card borrower debt (defined as the aggregate balance on all bank-issued credit cards for an individual bankcard borrower) drifted downward nationally 0.98 percent to $5,719 from the previous quarter’s $5,776, but was up 1.74 percent compared to the second quarter of 2008 ($5,621). The highest state average credit card debt remains in Alaska at $7,665, followed by Tennessee at $7,054 and Nevada at $6,517. The lowest average credit card debt was found in Iowa ($4,247), followed by North Dakota ($4,417) and South Dakota ($4,633).

The steepest increases in average credit card debt over the previous quarter occurred in the District of Columbia (+6.3 percent), Tennessee (+2.7 percent) and Alaska (+2.5 percent). Hawaii experienced the largest drop in average credit card debt (-2.7 percent), followed by the Utah (-2.6 percent) and Nevada (-2.4 percent).

Analysis

"The second quarter of 2009 has marked the first time we have seen a drop in the credit card delinquency rate over the past year. However, in looking at the historical trends back to the beginning of 1999, we observe that the credit card delinquency rate routinely drops after the first quarter — something that occurs 80 percent of the time. A clear indicator of seasonal patterns in consumer credit dynamics, the same across-the-board reduction in delinquency rates at the state level was also observed in the second quarter of 2008," said Ezra Becker, director of consulting and strategy in TransUnion’s financial services group. "Therefore, the recent change in delinquency may be more the result of seasonal fluctuations rather than a marked turnaround in nonpayment credit card behavior. In any event, credit card delinquency remains well within historical norms and is not a cause for significant concern at this time.

"The hot topic for most card lenders is no longer the impact of the recession on consumer behavior, but rather the impact of the recently enacted Credit Card Reform Act on the ability of card issuers to maintain profitability, the changes to their strategies required by the Act and the consequent changes in consumer behavior as a result of those new strategies — all of which are still largely unknown. This is where the focus of lender scrutiny and effort will be over the next several months, as they work to achieve compliance with the Act and provide competitive, profitable card products to consumers in what will be a dramatically different lending environment."

Forecast

"Although the recent decline in credit card delinquency rates may be seasonally driven, from a forecasting perspective TransUnion is seeing marginal improvement on the economic front. Recent data on the unemployment rate (dropping to 9.4 percent in July) gives some credence to the idea that we may have hit the bottom of the recession, impacting not only the equity markets, but also consumer confidence. Therefore, TransUnion has revised its forecasts for the 90-day credit card delinquency rate to just over 1.2 percent nationally by year-end. If the unemployment numbers remain true to form over the next two quarters and the stock market continues to rise, we could see delinquencies begin to drop near the beginning of 2010," continued Becker.

At the state level, Nevada is still expected to experience the highest delinquency rate by the end of 2009 (2.25 percent), while Alaska is anticipated to show the lowest delinquency rate (0.73 percent).

TransUnion’s Trend Data database
The source of the underlying data used for this analysis is TransUnion’s Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion’s national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels. For the purpose of this analysis, the term "credit card" refers to those issued by banks.

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.transunion.com/business