April 8,2009
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News: Looking for the Moody Swing.
Things will get better, but when? The Moody weatherman is still reporting more rain for the credit card industry. The month of February was just a continuation of the woeful trend we've been watching all year. Every month, credit card write-off rate keeps increasing. Times are getting hard. As job loss rates rise, credit card charge-off rates seem to always go along for the ride.
Just for comparison to a year ago, uncollectible credit card (charge-off) rates have jumped over 300 basis points. This makes the sixth month in a row for this stuff. The increase for February was 8.82% over January. The major credit card lenders are all hurting. Tomorrows forecast doesn't look any batter, either. Moody's is expecting charge-off rates to reach double-digits within a year before finally cresting around early 2010. This is with the assumption that unemployment will do the same.
One of the key barometers of credit card industry health is the delinquency rate. It's in keeping with expected predictions that his rate should rise slightly over the first quarter of any year Credit card consumers are still spent-out from the Christmas season. This year they rose from 6% to 6.14%. By the second quarter, however, the rates are supposed to decline as consumers recover from those holidays and start receiving their income tax refunds.
Moody's forecast this year doesn't look good. Because of the deplorable economic conditions we're all drowning in, Moody's projection is that this year will be different in a bad way. Credit card delinquency rates are expected to just keep going up until the unemployment index crests. That isn't expected to happen anytime this year. Record high delinquency rates are expected to continue braking historic records into the third quarter of this year which may cause the domino effect to fuel itself into next year.
One hope is that the "easing of payment rates" may soften the blow some and allow our nation's credit card debtors to get another foothold.