WASHINGTON –Will lenders soon have to pay up for increasing their attention to subprime cardholders?
A new report indicates that may be the case. The Wall Street Journal reported that according to new data from TransUnion, that missed payments on credit cards that lenders issued recently are higher than on older cards.
Nearly 3% of outstanding balances on credit cards issued in 2015 were at least 90 days behind on payments six months after they were originated. That compares with 2.2% for cards that were given out in 2014 and 1.5% for cards in 2013, the Journal reported.
The poorer performance on newer cards pushed up the 90-day or more delinquency rate for all credit cards to 1.53% on average nationwide in the third quarter—the highest level since 2012. The recent increase in subprime lending is one of the big contributors, the Journal noted. Lenders increased their attention to subprime card lending in 2014 and have been handing out more of these cards recently. They issued just over 20 million credit cards to subprime borrowers in 2015, up some 20% from 2014 and up 56% from 2013, the Journal stated.
The news follows CardHub reports this year that indicate the level of consumer debt is reaching “unmanageable levels.” Since late last year CardHub has been concerned over mounting credit card debt, and lenders forgetting lessons they learned from the Great Recession.
In A CUToday.info report, CardHub stated that the first quarter of 2016 “shares a lot of similarities” with Q1 2007, including the credit card balance paydown amount, its size in relation to the previous quarter’s build-up and the charge-off rate at the time.
“That is not good news for consumers, considering the financial turmoil that followed the last time around,” CardHub CEO Odysseas Papadimitriou said.
CardHub is projecting that the U.S. will end 2016 with roughly $1 trillion in outstanding balances for the first time ever, which would bring the amount owed by the average indebted household to more than $8,500.
“You therefore have to wonder how long we can keep this up,” Papadimitriou said.