According to the American Bankers Association (ABA), the late payment trend on consumer installment loans spiked up from July through September. In fact, it was the biggest increase to take place since the recession the country experienced back in 2001. While installment loan payments have shown signs of trouble, the data also indicates that consumers are still steadily paying off those credit cards.
For the purposes of this polling data, delinquencies were defined as a payment at least 30 days past due. More than 300 banks throughout the nation were surveyed for the poll.
Although delinquencies on consumer loans were up, late payments on credit cards were actually down during this same time frame. In fact, credit card delinquencies dropped to 4.18% from 4.39% during the second quarter.
The fact that consumers are choosing to pay their credit cards while being delinquent on other payments has confounded financial experts. Greg McBride, senior financial analyst for Bankrate.com, attempted to come up with an explanation by saying, “Credit cards have more payment flexibility than installment debt such as auto loans and home equity loans. When times are tough, consumers can skate by on the minimum payment on a credit card, but the $500 car payment is still a $500 car payment.” McBride alluded to the nature of the credit card as a consumer’s last line of defense, saying “[the] credit card is the line of credit that is going to put food on the table and pay for other day-to-day necessities.”
If you take what McBride had to say at face value, it indicates that more people are relying more heavily upon their credit cards to get them through the tough times, which might not bode well should the economy continue to falter.
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