Uh-oh! Subprime credit card growth leading to more missed payments
We’ve seen this before, and it tends not to end well. This time around it happening not so much in housing, but in auto loans and credit cards… and just like last time, it’s not likely to end well. What it does mean is there will be more Cash-Strapped Consumer that aren’t able to tap those credit cards to eek on by each month. It also probably means problems ahead for auto companies like Ford Motor, General Motors and Fiat Chrysler that are already using incentives to entice buyers.
According to a report by The Wall Street Journal, which cited the TransUnion data, missed payments on credit cards that credit card companies issued more recently are at a higher rate than older credit cards. What’s more, close to 3 percent of outstanding balances on credit cards that were issued last year are at least 90 days behind on payments six months after the purchases were charged. In 2014, the paper noted the rate was 2.2 percent for credit cards issued in 2014 and 1.5 percent for credit cards issued in 2013.
The increased miss payments on the credit cards that were issued in 2015 moved the 90-day-or-more delinquency rate for the entire credit card industry to 1.53 percent in the third quarter, which WSJ said is the highest level since 2012.
The big culprit for the missed payments? Lenders increased the amount of lending it did to subprime customers starting in 2014 and continued to do so more recently. Citing Equifax, WSJ pointed out that, in 2015, credit card companies issued slightly more than 20 million credit cards to subprime borrowers, up 20 percent from 2014 and up 56 percent from 2013.
