Delinquency Rate on Credit Card Loans (Q3 2018)

[Anonymous]

A nice graph from the St. Louis Federal Reserve Bank showing the spike. The gray shaded areas are the past recessions.

Delinquency Rate on Credit Card Loans, Banks Not Among the 100 Largest in Size (By Assets) (Q3 2018)

Correlation does not imply causation. It's just a coincidence that the spike is greater than during the 2008 Financial Crisis.

Nothing to see here. Keep Spending.

[iv]

Don't cherry-pick data. Show the whole thing:

Delinquency Rate on Credit Card Loans, Top 100 Banks Ranked by Assets (DRCCLT100N)

Delinquency Rate on Credit Card Loans, All Commercial Banks (DRCCLACBS)

Delinquency Rate on Credit Card Loans, Banks Not Among the 100 Largest in Size (By Assets) (DRCCLOBS...

Notice that other than the recent spike in defaults on cards from tiny banks ("Not Among the 100 Largest"), the overall numbers both in the top 100 and across all commercial banks have been hovering around historically low default levels since 2012.

Seems to show that the largest banks have more conservative underwriting, and the smaller banks have been a bit too willing to hand out card limits...

If/when you start seeing a spike on DRCCLT100N or DRCCLACBS... then you should start worrying.

[Anonymous]

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@iv wrote:

Don't cherry-pick data. Show the whole thing:

That wasn't my intention. The sky is not falling. I posted that due to the following post I made in another thread:

Article: "In the third quarter, the “delinquency rate” on credit-card loan balances at commercial banks other than the largest 100 banks – so the delinquency rate at the 4,705 smaller banks in the US – spiked to 6.2%. This exceeds the peak during the Financial Crisis for these banks (5.9%)."

Me: There's some good data at that link, and it does check out with what the fed reported, although that site comes across as a 'doom and gloom confirmation bias haven'. If you look at the delinquency rate for the top 100 banks - which is basically what every CNN, Forbes, Fortune, etc. is going to report, things don't look so bad at around 2.5%.

[SouthJamaica]

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@iv wrote:

Don't cherry-pick data. Show the whole thing:

Delinquency Rate on Credit Card Loans, Top 100 Banks Ranked by Assets (DRCCLT100N)

Delinquency Rate on Credit Card Loans, All Commercial Banks (DRCCLACBS)

Delinquency Rate on Credit Card Loans, Banks Not Among the 100 Largest in Size (By Assets) (DRCCLOBS...

Notice that other than the recent spike in defaults on cards from tiny banks ("Not Among the 100 Largest"), the overall numbers both in the top 100 and across all commercial banks have been hovering around historically low default levels since 2012.

Seems to show that the largest banks have more conservative underwriting, and the smaller banks have been a bit too willing to hand out card limits...

If/when you start seeing a spike on DRCCLT100N or DRCCLACBS... then you should start worrying.

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The divergence between the larger bank chart and the smaller bank chart is pretty weird.  I wonder what the reasons are. And I wonder what a credit union chart would show.

[iv]

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@SouthJamaica wrote:

The divergence between the larger bank chart and the smaller bank chart is pretty weird.  I wonder what the reasons are.

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Underwriting risk.

From a borrower's point of view - which one is more likely to "give you a chance" with a marginal credit report/score, or marginal income, etc - the small local bank who "looks at the whole person", or the big impersonal national bank who has a "computer soullessly analyze your reports"?

(It turns out that, statistically at least, the soulless computer is right...)

That does (slightly) skew the risks - the smaller banks are likely to have a somewhat increased percentage of marginal-vs-prime accounts compared to the megabanks.  So when an increased number of defaults on marginal accounts start to occur, the smaller lenders will see their default rates jump sooner/faster. (Even though the megabanks may lose more actual money, it's a smaller percentage of total lending.)

This can be a "canary in the coal mine" signal for the broader market, or just a limited sub-prime market blip.  Personally, considering how historically low overall defaults are and have been... I'm not too worried right now.

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@SouthJamaica wrote:
And I wonder what a credit union chart would show.

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Excellent question.  Directly comparable data doesn't seem to be easily available, but take a look at:

https://www.ncua.gov/analysis/credit-union-corporate-call-report-data/financial-trends-federally-ins...

Looks like cards are only about 6-ish% of CU loans, and the overall (cards/mortgages/other loans) delinquency rate at CUs dropped so far in 2018.

[Anonymous]

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@SouthJamaica wrote:
And I wonder what a credit union chart would show.

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Excellent question.  Directly comparable data doesn't seem to be easily available, but take a look at:

https://www.ncua.gov/analysis/credit-union-corporate-call-report-data/financial-trends-federally-ins...

Looks like cards are only about 6-ish% of CU loans, and the overall (cards/mortgages/other loans) delinquency rate at CUs dropped so far in 2018.

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 That's an excellent link, iv. Pages 5 and 6 especially.

This is just another random anecdotal observation, but many of the people I know who participated in the 'Bank Transfer Day' (switch to credit union from Bank of America) several years ago are really happy with their decision, and planned to get their auto and home loans from the same place. I know that for me personally, it will be the auto loan first, which I would like to show perfect payment history with before I get the home loan later. So it sort of compels us to be more mindful of our loans.