Surging private label credit card delinquencies are the latest warning sign for consumer spending
We continue to receive confirming signals for our Cash-strapped Consumer investing theme like the ones below contained inside a new report from Equifax. The report leads with the news that private label credit card delinquencies have been on the rise, hitting their highest level since 2011.
Certainly not good thing on its own, but even more worrisome when paried with other recent credit card data. During the March quarter, delinquency rate on credit-card loan balances at commercial banks other than the largest 100 – meaning the 4,788 smaller banks in the US – spiked to levels that exceed the peak during the Financial Crisis. Credit card balances are deemed “delinquent” when they’re 30 days or more past due, and exiting the March quarter nearly 6% of the outstanding credit card balances are now delinquent at these smaller banks.
Put it together with prospects for price increases as companies contend with higher input costs in a rising interest rate environment that will make consumer debt interest payments sap disposable income and it means prospects for Cash-Strapped Consumers reamining tapped out are high. Barring a surge in wages, which would likely lead to even more price increases and accelerate the Fed’s rate hiking, these consumers will have to rely on ways to stretch remaning disposable dollars.
The severe delinquency rate on private label retail credit cards jumped 57 basis points from March of last year and stands at 4.65 percent, according to Equifax’s latest National Consumer Credit Trends Report.
In a press release highlighting the results, Equifax said outstanding balances of $81.7 billion are up 0.8 percent from the same period last year, with delinquencies rising steadily on a seasonal basis since 2013. Currently, they are at their highest level since the early part of 2011.
In addition to rising delinquency rates with private label retail credit cards, Equifax found that mortgage debt now makes up a smaller portion of the total debt of consumers. It currently stands at 71.2 percent compared to 78.4 percent in 2008.
The makeup of non-mortgage debt has also changed. Equifax found that all credit cards account for 21.4 percent of non-mortgage debt, which is down from 10 years ago when it stood at 29 percent. The $1.4 trillion in outstanding student loans now accounts for 36.9 percent of all non-mortgage debt, up from 21.8 percent 10 years ago. Auto loans and leases stand at $1.24 trillion, which is a new record.
ource: Private Label Credit Card Delinquencies Surge | PYMNTS.com
