Credit card delinquency on the rise

Reporting agency says 11% increase could be an indication that tax refund checks are being used to cover daily living expenses.

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By Julianne Pepitone, contributing writer

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NEW YORK ( -- Credit card delinquency rates jumped 11% in the first quarter, possibly indicating that consumers are using tax refunds to pay day-to-day expenses, according to a credit reporting agency report released Monday.

The delinquency rate -- which is the ratio of borrowers 90 days or more delinquent on one or more of their credit cards -- increased to 1.32% in the first quarter of 2009.

That's up 9.1% over the previous quarter, and 11% over the previous year, according to the report from credit reporting agency TransUnion.

The average borrower debt rose 4.09% from the previous year to $5,729, TransUnion said. The agency uses data from 27 million anonymous, individual credit files.

"This increase could be an indication that tax refund checks, typically used to pay down balances in during the first quarter in years past, are now being used to cover daily living expenses," said Ezra Becker, of TransUnion's financial services group, in a written statement.

The economy is losing jobs by the thousands, and mass layoffs and pay cuts have continued the credit crunch. Banks have tightened lending standards because of a heightened default risk, providing less credit to consumers.

State by state: Delinquency rates were highest in Nevada, at 2.44%; Florida, with 1.9%; and Arizona, 1.68%.

Rates were lowest in North Dakota, at 0.73%; South Dakota, at 0.77%; and Alaska, at 0.77%.

Alaska has the highest average bankcard debt, at $7,476, while the lowest is West Virginia with $4,640.

Outlook: TransUnion said it expects the 90-day delinquency rate will continue rising, nearing 1.7% by the end of 2009.

Depending on the effects of stimulus programs and unemployment, the rate's upward climb could hit a peak in late 2010 or early 2011, the report said.

TransUnion expects Nevada will have the highest delinquency rate by the end of 2009, at 2.95%, while Alaska will have the lowest at 0.96%.

But outside influences could have unforeseen effects, the report cautioned.

"The impact the changes to credit card regulations and associated legislation, and the response of card lenders to those changes, will have on consumer behavior and hence delinquency rates is still unknown," the report said. To top of page

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