The highest delinquency rate ever seen on credit cards did little to dampen transactions on the cards during the critical holiday season. The American Bankers Association reports today that late payments on credit cards reached a record 4.09% of all accounts in the third quarter of 2003, up from 4.04% in the second quarter. The previous record, 4.07% of accounts, was set in the fourth quarter of 2002. At the same time, however, delinquencies as a fraction of dollars outstanding were well below the record high. This measure reached 4.66% in the third quarter, up from 4.51% in the second quarter but nowhere near the record of 5.45% in 1996. Credit card delinquencies as a percentage of accounts are seasonally adjusted, while delinquencies as a portion of outstandings are not. The ABA blamed rising delinquencies on the sluggish job market, but pointed to recent economic statistics as indications that conditions may be improving. These include U.S. factory activity, which reached a 20-year high in December, according to the Institute for Supply Management, and gross domestic product, which galloped ahead 8.2% in the same third quarter in which delinquencies hit their high. But if credit card delinquency was soaring, consumers weren't fazed in the holiday spending season just passed. Visa reports that charge volume on its credit cards used for retail purchases hit $27.1 billion in the four-week period leading up to Dec. 28. That's a 6% increase over the same period in 2002.
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