Credit Card Delinquencies Rise among Subprime Borrowers, Energy States
Oct 26th, 2016 @ 7:36 PM by Amber Nelson
Americans with less-than-perfect credit are falling behind on their payments at a rapid rate, according to new data from credit reporting agency TransUnion, while those in states dependent on energy markets are also seeing rising credit card delinquencies.
Subprime credit card accounts originated in 2015 now have a 2.95 percent 90-day delinquency rate, a large increase from older accounts. For those originated in 2014, the rate was just 2.18 percent and 2013 loans had a 90-day delinquency rate of only 1.50 percent.
“We see under-performance of newer vintage cards compared to those from past years, despite the general improvement in the economy over time,” said Paul Siegfried, senior vice president and credit card line of business leader at TransUnion. “We believe these increases are being driven in large part by the recent expansion of card credit by issuers to non-prime consumers, and the related growth of balances on those cards.”
Those subprime delinquencies are helping to drive up the national average for all credit card accounts. In the third quarter, 1.53 percent of all accounts – prime and subprime – were seriously delinquent, the highest level in four years. TransUnion stressed that while the rate is increasing, it is not yet close to the Great Recession peak of almost 3 percent in 2009.
Another factor pushing general delinquency rates higher is the rise of late credit card payments in states dominated by the energy sector. As oil prices have tanked over the last year, states like Oklahoma, Texas, West Virginia and Wyoming have seen jobs cut and incomes decrease, causing many residents to rely on their credit cards more. For example, in the third quarter, Oklahoma saw its serious delinquency rate rise 15.9 percent, compared to the national increase of just 6.7 percent.
“The yearly percentage increase in credit card delinquencies continues to rise for energy dependent states,” said Siegfried. “Many of these states may see continued pressure on their delinquency rates for at least two or three quarters after oil prices finally rise significantly. There is generally a lag for energy sector companies to ramp up their hiring, and for those newly employed to gain the benefit from their paychecks in catching up on past-due debt service obligations.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.