April 30, 2010
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News: Fitch; Consumers Struggling Less
Card Index results from Fitch Ratings indicates that credit cardholders have less struggles paying their credit card bills as delinquencies continue to decrease for the second consecutive month. However, it is believed that consumers will continue to feel the crunch for several months to come due to the continued high unemployment rate. Managing Director Michael Dean said that credit card write-offs and delinquencies show moderate declines however will remain elevated because of a "strained labor" market.
According to the Fitch Ratings, credit card delinquencies of 60 days or more fell to 4.27 percent while delinquencies of 30 days or more also fell to 5.74 percent down from 6 percent the same time last year. Overall asset backed securities (ABS) credit card delinquency index of 60 days or more fell to 5.16 percent and the 30 days or more index fell to 7.24 percent.
Prime credit card defaults declined as well during March to 10.93 percent 17 percent higher than same time last year. However, defaults remain higher than the overall annual charge-off rate which equals 10.69 percent attributed only to a decline in Bank of America's defaults. Retail branded credit card defaults fell to 13.01 percent in March, a .4 percent improvement from the previous month but remains 17 percent above same time last year.
Gross yield of interest income and other fee income earned off of loan balances set another record high as it rose to 22.84 percent from the 21.47 percent a month earlier. The increase is partially due to discount options and re-pricing initiatives. Consumers did a better job at paying down credit card debt as the monthly payment rate (MPR) increased to 19.35 percent up 9 percent from the same time last year. Speculation is that income tax refunds help to push consumers into paying debt. Despite moderate improvements in loan delinquencies, it appears that Americans will continue to feel the pressures of a slowly recovering economy.