Consumer Payment Card News

Credit Card Account Rejection and Cancellation Rates Creeping Up

Credit card account rejection and cancellation rates rose slowly last year and will likely continue throughout out 2019. There is a growing consensus an economic downturn is long-overdue since the Great Recession of ten years ago.

Credit Card Rejection and Cancellation Rates

Slow Pays Rising

The latest S&P/Experian Consumer Credit Default Indices for December reveals the bank card default rate rose from 3.25% to 3.34%. The auto loan default rate increased from 0.93% to 1.03%. The first mortgage default rate increased from 0.64% to 0.67%. While the increases are tiny they reflect a growing trend across the board for lenders, and a big caution flag.

S&P says it has been almost two years since default rates across the three sectors and all five cities tracked in its report rose together.

Rejection & Cancellation Rates

The New York Federal Reserve Bank notes rejection rates on credit card applications rose in 2018 as did the number of times lenders cancelled accounts. These trends, combined with gradual increases in market interest rates during 2018, point to increasing pressure on the availability of consumer credit as the economy shifts from the fast path of growth last year to what analysts expect to be a slower, more sustainable pace in 2019.

Delinquency Ratios

Credit card delinquency (30+ days) for the fourth quarter (4Q/18), among the nation’s Top 4 issuers, increased 13 basis points (bps) sequentially, and edged up year-on-year (YOY) by 16 bps. According to CardData, the average rate among the top four issuers (Chase, Capital One, Bank of America, Citibank) was 2.40% for 4Q/18, compared to 2.27% for 3Q/18 and 2.34% for 4Q/17.

The uptick in credit card delinquency, coupled with a recession forecast, finds loan-loss reserves increasing among the major credit card issuers, and the metrics are expected to rise throughout 2019, according to RAM Research.

Furthermore, credit card charge-offs, seasonally adjusted (SA), among the top 100 U.S. banks for the third quarter (3Q/18) edged up six basis points (bps) sequentially, and up 8 bps year-on-year (YOY). Compared to two years ago, the SA charge-off ratio is up 47 bps, and the NSA charge-off ratio is up 55 bps, according to CardData.