Credit Card Delinquencies Fall

Credit card delinquencies declined in April for the fourth straight month, indicating that consumers are gaining traction.  Diminishing delinquency and  default rates could eventually lead lenders to reduce strict lending standards; following significant tightening subsequent to the subprime crisis.  On this  note, more lenient lending standards could have wider implications for the U.S. economy, which consists mostly of consumption.  Since the onset of the recovery, consumption growth has lagged previous recoveries with deleveraging and a lack of credit acting as a strong headwind.  As confidence builds, more  lenient standards could eventually bolster consumption by providing consumers  increased purchasing power.

While the downward trend in delinquencies is a move in the right direction,
significant changes to lending policies will not occur overnight–delinquencies remain well above their historical averages.  To monitor changes to lending standards I recommend you review the Fed’s quarterly Senior Loan Officer Survey, which tracks credit standards, demand for credit, and borrowing costs for personal, business, and real estate related loans.

Credit Card Delinquencies: