April 16, 2010
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News: Indicators Show Economy Strengthening
Some indicators exist that could mean the U.S. economy is beginning to strengthen. The most reliable predictor of future credit card defaults is the measure of delinquencies of 30 days or more. Several of the nation's top credit card companies have reported encouraging results for first quarter. Consistently the top performer throughout the recession, American Express (AmEx) reported its card delinquencies of 30 days or more fell to 3.3 percent in March from February's 3.6 percent. However, AmEx didn't fare as well in the default department. The company reported credit card defaults increased slightly to 7.5 percent in March up from 7.4 percent in February.
Capital One Financial Corp. (COF) also reported a decrease in credit card delinquencies which fell to 5.3 percent in March down from February's 5.51 percent. On the other hand, COF's losses increased as card defaults rose to 10.87 percent in March up from 10.19 percent in February.
Discover Financial Services reported credit card delinquencies of 30 days or more down to 5.39 percent in March from 5.5 percent the previous month. Performing better than its competitors, Discover's card defaults actually decreased in March to 8.51 percent down from 9.11 percent in February.
The nation's top credit card company, Bank of America Corp (BofA) reported card delinquencies of 30 days or more decreased to 7.07 percent in March from 7.23 percent the previous month. Although the big bank decreased card defaults, they remain the worst performer in regard to card defaults. The company wrote off 12.54 percent in March down from February's 13.51 percent.
Banks write-off bad debt after it reaches 180 days delinquent. Credit card write-off's also known as defaults are considered debt that the bank does not expect the consumer to meet his repayment responsibility. While the financial industry dealt with record breaking defaults topping an average of 10 percent, most lenders did not expect to see this number level off until later in the year making the recent reports encouraging to say the least.