Consumer Credit – Are You Paying Your Bills On Time?

Every month we get a fresh update on the consumer master trust credit card data – monthly average delinquencies and net charge-offs, or as we like to call it, the “Are you paying your bills on time?” report.  

The short answer is yes, consumers across America are paying their bills on time and there are few defaults. We are not terribly surprised by these great numbers, as the unemployment rate has been falling since the beginning of 2010 and we are currently in one of the longest economic recoveries on record. Data should be looking very good!
 

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While the data is looking good, there is more to the story. Charge-offs and delinquencies bottomed out sometime in 2015 and since then have shown no real improvement. So if the numbers are not going to get any getter, the best we can hope for is stability and in the worst case some widening. A very close look at the numbers shows some slight weakening in delinquencies, which is normally a precursor to charge-offs. It may be that these higher delinquencies have resulted from aggressive marketing tactics by credit card issuers. We have all seen more card offers in our mailbox over the last year or so; bank and credit card companies are desperate for a little growth and are looking for new business. But perhaps the higher delinquencies are really because consumers have contributed as much as they can to this economic expansion and they just can’t spend any more. If just about everyone who wants a job has a job, and if wages are not going up and the savings rate has been falling since 2015, maybe this is as good as it gets. 

We believe this is likely as good as it gets, yet we are not concerned these good numbers will soon reverse. With a growing economy and an accommodating Federal Reserve, the current economic expansion should continue a while longer, though it is always good to watch the fundamental data for signs of a change, and to continue to ask the question, “Are you paying your bills on time?”

Source: Barclays, Bloomberg