In the second quarter, consumers continued to simultaneously take on more debt and open more new credit cards, while also making increased efforts to stay current on their various bills for these accounts.
Borrowers seemed to become more comfortable with their credit use during the second quarter of the year, as they slashed delinquency once again, while still increasing borrowing and new account origination, according to the latest report from the credit reporting bureau TransUnion. In fact, 90-day delinquency fell to just 0.63 percent of all accounts, down from 0.73 percent in the first quarter of the year. However, while this was a slight increase from 0.6 percent in the same quarter last year, it was also the second-lowest delinquency rate since the end of 1994, when it stood at 0.61 percent.
"The national credit card delinquency rate continues to remain at the lowest levels we've observed in 18 years," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "It's a positive situation because average borrower balances have increased over the past year as new card originations have grown. These low delinquency rates reflect both continued conservatism in lender underwriting and the ongoing prioritization of card payments among consumers."
The increase in borrowing was fairly significant from one quarter to the next, rising 5.79 percent to an average total debt of $4,971 per person in the second quarter, the report said. That was up from $4,699 in the first quarter, but still well below the $5,719 observed in the same period in 2009, when the recession was just ending.
Further, borrowers continued to seek out new cards as well, driven primarily by interest from subprime consumers, the report said. In all, new card originations rose by roughly 4 percent, of which 26.1 percent were considered subprime. And while that was slightly lower than the subprime origination rate for the same period in 2011 (27 percent), it was also well above the 20.6 percent for 2010's second quarter.
TransUnion also believes that delinquency rates will stay at roughly the same level for the remainder of the year, barring any unforeseen economic changes or alterations to lenders' underwriting standards, the report said. Further, seasonal fluctuations in consumers' borrowing habits might affect increases in late payments as well, though not appreciably.
However, many consumers may have taken on that additional debt out of necessity, rather than it being the result of greater comfort in dealing with their various accounts. Prices for household essentials such as groceries and particularly gasoline have been on the rise for some time, and with wages and hiring largely stagnant in the past few months, that might mean more consumers were forced to take on additional debts without being able to pay them back in full.
