The term delinquency credit card rate or rating could mean anything from an investment rating to a credit card interest rate or even the total delinquency reported among all American consumers. If you were to define basic delinquency credit card rating then are probably talking about interest rates for credit cards. Some cards have low APR’s when paid on-time but will activate higher APRs if the borrower is late with a minimum payment. Such a delinquency credit card charge might be charged immediately or after a selected number of pate payments. Sometimes these delinquency rates can exceed 20%. States have the right to limit the amount of the delinquency rate.
TransUnion Findings
TransUnion recently released results of an analysis of credit trends in the industry. For the last quarter of 2008 the average bankcard borrower debt increased 0.33% to $5,729. This was an increase from last year. Several states came out the largest in debt, such as Alaska, Nevada and Tennessee. The bankcard delinquency rate, which TransUnion defines as “the ratio of bankcard borrowers 90 days or more delinquent on one or more of their bankcards” also went up to 1.21%. Much of the blame was attributed to holiday spending, not to mention the recession hitting full swing.
One year later, TransUnion released a study for the third quarter of 2009. Interestingly, results for some 27 million random borrowers pointed to slightly improved results. The national credit card delinquency rate dropped to 1.10% in the third quarter of 2009. This was down from the previous quarter. This year Nevada had the most incidences of delinquency followed by Florida, Arizona, North Dakota, South Dakota and Alaska. However, Alaska remained as the highest state average for debt with $7,699. The national average of debt for credit card users went down to 1.87% and down to $5,612.
The Test of Late 2009 and 2010 Yet to Come
Overall, this was good news, as it was the first national decrease of the third quarter from the previous quarter in ten years. Experts stated that consumers are starting to take their financial responsibilities seriously, recognizing that credit is their one true “vehicle” in today’s floundering economy. The economic recession has also helped to teach consumers about the importance of maximizing their dollar. Now more than ever, people are shopping around for cheaper deals and maintaining their precious credit score.
However, the true test of our national financial situation will come in the last quarter of 2009. Many retailers are counting on a record-breaking sales quarter for the holiday season and towards the first few months of the year. Will consumers spend within their means or at least narrow down their Christmas list this year? Or will they max out credit cards and spike up the delinquency rate?
Delinquency rates escalate in the third quarter, as history tells us. (Delinquency rates are 90 days or more past due accounts) This is why 2009 started out as a promising year. Some sources speculate that one reason to account for this positive change is in the increase of unemployment. With less people working, people are naturally becoming much more frugal and are not impulsively charging their credit cards. They are unsure about where they will receive their next paycheck and so are beginning to view credit cards the way they should be viewed—as emergency funds only, to be paid at the end of the month when possible.
Congress Steps In for the Rights of Consumers
Lastly, there’s the issue of the recently passed Credit Card Act of 2009 by the U.S. Senate. This will go into effect in February 2010. While this law was actually put into effect for the safety of consumers, as it discriminates against credit card companies that use unfair practices when lending to consumers, it may open more opportunity for credit abuse from overeager spenders. The new legislation makes changes to the way credit card payments are applied to balances, retroactive interest rate hikes, notices of changes to credit card agreements, over the limit fees and age requirements for credit cards.
This federal law is a major precedent, taking away state power and the rights of credit card companies to overcharge or take advantage of consumers in any other way. The bill was passed with bipartisan support by the House of Representatives and the U.S. Senate as well as President Obama. It remains to be seen how this bill will affect the last quarter of 2009 and on into 2010.
Nevertheless, this is an ideal time to start shopping around for a new credit card, given the fact that rights have been restored to consumers. Remember though to minimize impulse purchases and always, if possible, pay the balance at the end of the month. For helping with comparing credit card contracts use our free credit card finder tool. This tool can compare credit card plans and give you localized quotes on a new program. Get started using our credit card finder now!
