Bankers: Credit card delinquencies fell significantly in the first quarter

Credit card delinquencies declined significantly during the first three months of the year as more consumers pay off their bills each month.

Late payments fell to 2.44 percent from 2.60, well below the 15-year average of 3.82 percent, as consumers continue to improve shore up their balance sheets, according to an American Bankers Association report released Thursday.

"Bank card delinquencies remain at surprisingly low levels even as credit card spending increases,” said James Chessen, the ABA’s chief economist.  

“More and more consumers are using their credit cards as a payment vehicle, paying off or paying down their balances each month.”

Following two quarters of record lows, the composite ratio, which tracks delinquencies in eight closed-end installment loan categories, edged slightly higher in the first quarter, rising to 1.63 percent from 1.59 of all accounts, well under the 15-year average of 2.33 percent.

The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

Chessen said that consumers are responsibly managing their finances and are better able to manage their debt as the economy improves.

“Consumers have a greater capacity to meet their financial obligations due to an improving economy, low interest rates and the significant deleveraging they’ve done in recent years,” Chessen said.

“A disciplined approach to managing debt has helped people improve their financial positions, keeping delinquencies near historical lows.”

While home equity loan delinquencies rose 9 basis points to 3.57 percent of all accounts, home equity line delinquencies continued their downward trend, falling another to 1.57 percent from 1.67 of all accounts in the first quarter.

“Home equity line delinquencies have fallen back to what they were five years ago,” Chessen said.

“This is a positive trend in light of the number of home equity lines that will move into the fully amortizing period over the next several years, raising the monthly payment obligations for some borrowers.”

Chessen said that while delinquencies may vary slightly in the months ahead, they are likely to remain near their current levels.

“In the wake of significant consumer deleveraging, delinquency rates have reached a cyclical low,” Chessen said. “With an improving economy and continued consumer vigilance, we expect delinquency rates to fluctuate at this lower end of the range for the foreseeable future.”