Credit card delinquencies are up year-over-year, but that’s not the whole story

Retail sales numbers came in a bit lower than expected yesterday, with consumer spending inching up just 0.1% from April to May. It’s another sign that consumers are starting to feel the strain of sustained higher prices.

Many consumers have been keeping their shopping habits up by relying on credit cards, perhaps a bit too much.

Economists have been warning for months now about the rise in credit card delinquencies. But those numbers, of course, need some context.

Credit card delinquencies are up year over year, said Silvio Tavares, president and CEO of credit scoring company VantageScore.

“But if you look at it month to month, credit card delinquencies have actually been improving through March, April and a little bit through May,” he said.

Tavares said the average credit score by his company’s rankings is pretty decent: 702.

But that hides a bifurcated market — two different Americas. Wealthier consumers are paying off cards and paying down debt, boosting their scores.

“But that lower consumer is increasingly falling behind on their credit balances and that’s really where we’re seeing the localization of the increased delinquencies,” he said.

That lines up with data from WalletHub, which found that the $1.26 trillion in total credit card debt is down 14% from its 2007 peak. 

But average debt per household is still well over $10,000.

“That’s a substantial part of people’s income,” said Cassandra Happe, a WalletHub analyst.

“So while we’re seeing this increase in spending and it’s helping some factors within the economy, a lot of people are taking on debt in order to help fuel the spending in the economy,” she said.

That’s already showing up in some early indicators.

Matt Layton, a senior vice president at prepaid legal services company LegalShield, said they analyze the roughly 150,00 calls they get every month. And these days?

“A larger percentage of those are coming from questions about, ‘How do I pay my bill? How do I deal with the bankruptcy?'” he said. “We’re seeing each of those increase each month.”

The company mines that data to create its LegalShield Consumer Stress Index and found, for example, a 13% increase this year in people calling about collections.