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Credit card delinquencies decline sharply

With a HT to Mark Perry (a good source for otherwise-obscure but important economic facts), I'm posting this chart of credit card delinquencies, which uses data compiled by the Fed. My chart covers a longer period than Mark's (using all the data available), and I think it's worthwhile noting that the current delinquency rate (4.2%) is lower than the average of the past 20 years (4.6%) and lower even than the average of the pre-2008 recession period (4.4%). Consumers are deleveraging and they are also getting their financial health back, however painful this process has been.

Update: A reader's question prompted me to add the next chart, which shows credit card chargeoff rates. It strikes me that a customer typically becomes delinquent before the bank writes off his loan; a bank is not going to write off the loan until it is clear that a customer can't or won't pay. And indeed, the charts suggest that delinquency rates peak prior to the peak in chargeoff rates. Delinquencies look like they peak around the end of a recession, while chargeoff rates peak about 6-12 months after a recession. So that suggests that delinquency rates are a leading indicator of chargeoff rates. The picture becomes a little clearer: we see some significant improvement over the past year, and it would appear that things are going to continue to improve, at least from the banks' perspective.

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