You will start seeing many pieces of news mentioning deteriorating credit quality over the coming months. We have cited various indicators for the past nine months, and they are beginning to cure.
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. US credit card delinquencies are rising, a potentially ominous sign for the economy.
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Americans now have more credit card debt than before the financial crisis — over $1 trillion.
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US household balance sheets are better positioned than before the recession, but “new delinquencies could be early sign of stress”.
Credit cards delinquent 90+ days are bumping up against the 8% metric, less than half the recessionary peak of 14%, but enough to bring credit policy folks to raise their loan loss reserves. New delinquency, 30+ days is up over 6%, almost 20% higher than 2015.
New delinquencies, and the ensuing costs of collections and loan loss expense will force credit card profits to tumble over the coming months. If the industry does things right, meaning they put in controls now, we will probably cycle out of the mess in two years.
…if not, hold on to your hat because it will be an ugly ride.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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