Yesterday, TransUnion reported that credit card delinquencies fell last quarter to 1.1%.
Good news, right? Well, probably.
But Dennis Gartman wonders if this diligence is due to the fact that consumers are freaked about about having their cards cancelled:
The Gartman Letter: [I] It was the credit card delinquency rate that caught our eye, for according to Transunion… the organisation that keeps such data… late payments on credit cards fell 1.1% in the 3rd quarter of this year. We’ve seen credit card delinquencies fall in the 1st and 2nd quarter, but Transunion noted that normally these delinquencies rise in the 3rd quarter of the year and this year they’ve fallen yet again so we “take” this as good news rather than bad. However, as is always seemingly the case, those wishing to find fault in the data and wishing to see the glass as one quarter full rather than even one half full, note that it is possible that consumers are keeping their credit cards current because they know that they need access to that credit to buy important goods such as food and gasoline even as they are running behind on their home mortgages and rent.
Consumers know that banks and land lords haven’t much real short term “clout” when it comes to demanding swift payment, and consumers have learned how to “scam the system,” making payments at the very last moment to avoid foreclosure and eviction. However, they keep their credit cards current, for they know too that banks can shut down credit extensions by a mere click of the computer key on a credit card; hence delinquencies are low and falling even as foreclosures and evictions are higher and rising. Ah, the vagaries of consumers finance in these post-recession times!