Credit Card Stats: Strong Get More, Weak Get Less, But Risk is Everywhere

Close-up picture two credit cards with numbers

Close-up picture two credit cards with numbers. Macro. Small Depth of field

Today’s ABA Banking Journal indicates growth in purchase volumes for super-prime and prime borrowers, and lagging growth by subprime card accounts.  Appropriately so, stronger credit scored accounts gained volume as the weak component lagged.

The report behind the article is more insightful, with several interesting data points. One issue: the metrics touch account growth but does not consider ensuing delinquency.

While growth is undoubtedly positive, Mercator Advisory Group keeps a keen eye on delinquency, which continues to bubble up.  Most current numbers by the Federal Reserve Bank, in their Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks report indicates an increase in early delinquency, running at 2.48% for 4Q17, versus 2.36% for 4Q16 and 2.16%,  for  4Q2015. With a 32 basis point increase over 2014, issuers need to ensure their infrastructure, policies and strategies poise the business for increased account flows.  One lesson from the last recession is that the downturn can affect all credit segments.

Portfolio growth is essential, but the collection function protects the balance sheet.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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