April 26, 2010
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News: Moody Credit Card Defaults Peak
Analysts say the U.S. economy has begun to turn around as Moody reports that credit card defaults peaked during the first quarter 2010. According to Moody's Investors Service overall, U.S. card issuers wrote off a record high 11.12 percent of card debt. Defaults were at the highest point in 20 years. Moody which conducts financial research and analysis on commercial, consumer, and governmental entities including the card industry released its monthly publication Credit Card Index. The index tracks stats such as securitized card loans and balances on cards that are packaged and sold in investment vehicles. The company also uses a standardized rating scale to rate consumer card holders. According to the most recent report by Moody's, four of the six largest U.S. card issuers reported an increase in credit card defaults for the month of March. Discover Financial and Bank of America both reported a decline in defaults.
A decrease in card delinquencies during the past three months is an indication that defaults have peaked. Credit card delinquencies of 30 days or more fell for the fifth straight month to 5.79 percent; Citibank was the only card issuer in the nation's top six to report an increase in delinquencies. American Express Co was once again the top performer and the only major credit card company that didn't show an increase in delinquencies. Card delinquencies of 30 days or more decreased to 3.3 percent down from 5.1 percent from the same time last year; the lowest delinquency rate among the top U.S. card companies.
No surprise that Citigroup was the poorest performer as the bank carries the highest risk credit card portfolios. Nevertheless, Citi remains optimistic in that new risk strategies are expected to see a leveling of the company's defaults and delinquencies. Late last year, Moody forecasted that defaults will continue to rise and peak sometime during mid 2010. If the newest report is valid in that card defaults have already peaked, Americans will feel relief sooner than expected. Good news for the housing, credit, and automotive industries.