Credit Card Volume and Quality at Depository Institutions

Data from Veribanc, Inc. allow a comparison of credit card outstandings at banks, credit unions and savings and loan associations as of the first quarters of 1999 and 2000, as well as trends in delinquency rates and charge-offs. As of the end of the first quarter of 2000, total credit card outstandings of commercial banks, both held in their portfolios and securitized, amounted to $505 billion, up from $474 billion a year earlier.

Even if securitized receivables of banks are excluded, the accompanying table shows that commercial banks still held a major portion of credit card receivables.

Credit Card Debt Outstanding, Excluding

Securitized Holdings, 1^st Quarters, 1999 and 2000

($ Billions)

If it is assumed that credit unions and savings & loan associations have not securitized their holdings, the market share of commercial banks, including their securitized portion, has declined very slightly from 94.8 percent to 94.4 percent.

However, while banks’ delinquencies and charge-offs on their credit card outstandings, excluding the securitized portion, have dropped slightly, they still remain well above similar data for credit unions and savings & loan associations. (See the table below). In part because of their close associations with their members and tendency to be employer-based, credit unions have maintained very low levels of delinquencies and charge-offs. In contrast, savings & loan associations, even with their relatively low outstandings, appear to have been significantly less selective than the commercial banks. In relation to commercial banks, their percentages of serious delinquencies to outstandings were higher than those of banks in both years, and their net charge-off rates were higher in 2000 than those of the banks.

Serious Delinquencies and Charge-Offs on Credit Card Debts

1^st Quarters, 1999 and 2000

Source: Veribanc, Inc.

As we have noted previously, delinquency rates are significantly lower on other types of bank loans to consumers than on credit card debt. For example, at the end of the first quarter of 2000, serious delinquencies, as a percentage of outstandings, on non-card consumer installment loans at banks were 0.96 percent vs. 1.97 percent on credit card debt. Serious delinquencies on banks’ home equity loans were 0.34 percent. Of course, these differences in risk help to explain similar differences in the cost of credit.