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Credit Card Companies' Focus On Subprime Increases Rate Of Missed Payments

Credit card companies have not been shy when it comes to lending to subprime customers, but according to new data from TransUnion, that strategy is starting to backfire for the credit card issuers.

According to a report by The Wall Street Journal, which cited the TransUnion data, missed payments on credit cards that credit card companies issued more recently are at a higher rate than older credit cards. What’s more, close to 3 percent of outstanding balances on credit cards that were issued last year are at least 90 days behind on payments six months after the purchases were charged. In 2014, the paper noted the rate was 2.2 percent for credit cards issued in 2014 and 1.5 percent for credit cards issued in 2013. The increased miss payments on the credit cards that were issued in 2015 moved the 90-day-or-more delinquency rate for the entire credit card industry to 1.53 percent in the third quarter, which WSJ said is the highest level since 2012.

The big culprit for the missed payments? Lenders increased the amount of lending it did to subprime customers starting in 2014 and continued to do so more recently. Citing Equifax, WSJ pointed out that, in 2015, credit card companies issued slightly more than 20 million credit cards to subprime borrowers, up 20 percent from 2014 and up 56 percent from 2013. Missed payments in states that are dependent on oil and the energy sectors for their economic growth are also suffering from an increase in missed payments. With oil prices at lows, those states are having a tough time with layoffs. In Oklahoma, missed payments of at least 90 days increased 12 percent, while, in Texas, it was up 10 percent and, in Wyoming, 20 percent in the third quarter compared to a year ago.



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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