Who's right? The American Banker’s Association or The Standard & Poor’s/Experian Consumer Credit Default Index?
am stumped. Perhaps you can help me
explain what seems like a contradiction.
recently published the following headline: Credit card delinquencies fall to
8-year low. This story is based on a
report by the American Banker’s Association (ABA). On the other hand, The New York Times
published an article about how credit card default rates are still rising to
record levels. This story is based on a
study completed by The Standard & Poor’s/Experian Consumer Credit Default
ABA posits in the CNN article that “About 3.88% of bank credit card accounts
were past due by 30 days or more in the first quarter of the year.” However, The Standard & Poor’s/Experian
Consumer Credit Default Index indicates, as reported by the New York Times that
“In the three months through April the default rate on credit card loans had
climbed to 9.14 percent, the highest since the index began to be calculated in
2004.” To be in default, an account must be at least six months behind, unless
the lender has already written it off or the borrower has filed for bankruptcy.
I am comparing apples to oranges. I can think of two reasons: 1) The ABA is
looking at “bank credit card accounts”, perhaps a more restricted data set, and
2) the definitions of past due and in default differ. But, do these reasons--and others unbeknown--adequately explain a
difference of 5.26 percent? Intuition
tells me that the ABA number should be much higher, perhaps as much as double the
am sure that the key to resolving my confusion is a better understanding of
each organization’s methodology in assessing the data. However, the discrepancy just does not make much sense to
me at all.
What do you think?