Default rates on bank cards spiked to their highest level in almost four years in January, according to the latest S&P/Experian Consumer Credit Default Indices.
The bank card default rate recorded a 3.21 percent, up 26 basis points from December. Auto loan defaults came in at 1.06 percent, up three basis points from the previous month. The first mortgage default rate was 0.72 percent, up one basis point from December, while the second mortgage rate was 0.48 percent, up 7 basis points for the month.
The composite rate for January, which combines all four of them, was 0.92 percent in January, up three basis points from the previous month.
“While consumer credit default rates on mortgages and auto loans remain low and stable, default rates on bank cards have popped up to the highest level seen since July 2013,” David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said.
All five major cities saw their default rates increase in January. Miami had the largest increase, up 14 basis points to 1.67 percent. Miami’s composite default rate is at a 31-month high. Dallas and Los Angeles both reported eight basis point increases from the previous month at 0.75 percent and 0.80 percent, respectively, in January. Chicago saw its default rate increase five basis points to 1.03 percent. New York reported a default rate increase of one basis point to 0.88 percent.
“Current default levels do not present any immediate concerns for the economy,” Blitzer said. “During 2004-2006, a period of strong retail sales and consumer spending, bank card defaults were higher than today. Moreover, even if interest rates were to increase much faster than the Fed or most analysts currently expect, the cost of borrowing money is unlikely to create problems for consumers. The weak spot, if there is one, would come with a rise in unemployment and an economic downturn.”