According to an article from Reuters, credit card delinquency rates rose overall at the end of the month of August. Companies such as Capital One, Chase, Discover and other U.S. banks all reported a month-over-month increase.
In the article, Reuters mentioned several rising delinquency rates. First, Capital One reported a rise of 0.16 percent from July, establishing a new credit card delinquency rate of 3.97 percent in August. JP Morgan, or Chase bank, reported a 1.16 percent delinquency rate, up from 1.15 in the previous month of July. Discover accordingly reported a 2.1 percent delinquency rate, up by 0.1 percent.
Finally, the overall delinquency rate among U.S. banks collectively rose by 0.27 percent by the end of the second quarter: up to 2.47 percent from 2.2 percent.
It isn’t the first new development this year when it comes to credit cards either. According to the New York Federal Reserve, credit card debt has been on the rise recently; more specifically, credit card balances rose by $20 billion collectively among American consumers by the end of the second quarter of 2017. Notably, this contradicted a Q1 trend where credit card debt dropped by $15 billion, resulting in a $5 billion net increase for the first half of 2017.
The rising consumer credit debt could theoretically explain for the rise in delinquency rates. The theory being with a greater credit card balance, there would be a greater chance of missing a payment for the average consumer.
At any rate, it will be interesting to see how credit card use, credit card debt, and delinquency rates develop throughout the rest of the year. The upcoming holiday season is renowned for escalating credit card balances as consumers scramble to cover their major holiday expenses. It isn’t unreasonable to expect a rise in credit card debt towards the end of 2017, then a drop during the first quarter of 2018 when credit card holders are on their best post-holiday behavior.
Author: Andrew Rombach
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