Roll Rate

One in five people who are 30 days late on their credit card payment will go on to become 60 days late. One in five. That’s a “roll rate”—the official term for those who go from 30 to 60 days delinquent on their account—of twenty percent.

Twenty percent, people. Considering the average credit card interest rate as of 2019 is somewhere right around 15.8%, that means credit card companies stand to rake in some serious dough from our delinquent accounts.

But it’s not just interest charges we should be thinking about here.

Roll rates are used to help credit card companies figure out how much money they could lose because of delinquent accounts. We mentioned earlier that there’s just about a 20% roll rate from 30 days delinquent to 60 days delinquent. But card companies also calculate roll rates from 60 to 90 days, from 90 to 120, from 120 to 150, and so on. Why? Because at some point, they’re going to have to say, “Martha apparently isn’t going to pay her debt on this card, so we might just have to write it off as a loss.” That’s called a charge-off, and the rules for when they can do that vary by company, and laws about it vary by state. Calculating roll rates helps those companies figure out when they’re getting near charge-off territory—usually somewhere in the neighborhood of 270 days delinquent—and then they can take action to try and prevent the loss from happening.