Consumer Credit Default Rates Reach New Post-Recession Low

S&P and Experian report the comprehensive measure of changes in consumer credit defaults is at a new low since the economic recession, but bank card default rates continue to increase.

Consumer credit default rates reached a new low since the economic recession, according to a news release from S&P Dow Jones Indices on the latest S&P/Experian Consumer Credit Default Indices.

The comprehensive measure of changes in consumer credit defaults shows a composite rate of 0.86 percent in April, which is down seven basis points from March, according to the news release.

The bank card default rate increased 17 basis points in April and 60 basis points year-to-date. The April 2016 bank card default rate is 3.09, compared to 2.92 in March.

Auto loan defaults declined five basis points to 0.97 percent, while first mortgage defaults declined by eight basis points to 0.69 percent in April, according to the news release.

“For two months, the overall consumer credit default rate has dropped to new lows while the default rate on bank cards has climbed,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices in the news release. “Since the financial crisis, consumers are paying more attention to their debts, particularly longer term financial commitments such as homes and autos … The longer term post-crisis decline in the bank card default rate leveled off in 2014. Since then, it has been in a range of 2.5 percent to 3.2 percent. Bank card, auto, and mortgage default rates are all lower than their pre-financial crisis levels. However, the bank card rate is more volatile than the others and more sensitive to consumer spending trends. Whether the default pattern for bank cards stabilizes remains to be seen.”

The S&P/Experian report also tracks default rates in major U.S. cities.

Three of the five major cities’ default rates increased in April. The rate in Miami increased six basis points to 1.21 percent, followed by New York at 1.01 percent, up two basis points, and Dallas at 0.76 percent, an increase of one basis point. The rate in Chicago remained at 1.03 percent and Los Angeles reported the only decrease, by 10 basis points, to 0.71 percent, according to the news release.