February 23, 2010
-
News: Moody's; CC Delinquencies Down
According to Moody's Investors Service, fewer Americans were late with their credit card payments during January. Card delinquencies of 30 days or more dropped to 5.96 percent in January the lowest since September. However, credit card defaults rose slightly to 11.15 percent up significantly from 7.74 percent for the same time last year. The rate is the highest it's been since August, 2009 when defaults topped 11 percent. Experts don't believe the credit card defaults have yet peaked. Moody expects them to continue to rise over the next few months before it peaks at 12 percent. The unemployment rate continues to influence defaults as well as the nation's unemployment rate reached 10 percent in October and hasn't dropped yet.
Results varied by lending institution; Discover Financial and Bank of America experienced lower credit card defaults while JPMorgan Chase & Co. increased. Since delinquencies determine future write-off's, Will Black and Jeffery Hibbs, analysts with Moody say there is a “silver lining” in delinquency figures. As credit card delinquencies decrease, we can expect write-off's in 180 days to also decrease. Early state delinquencies indicated that cardholders that are 30 to 59 days late fell to 1.44 percent in January down from 1.71 percent same time last year. According to Hibbs, these early stage delinquencies are an indication of what we can expect with defaults five months down the road.
Experts feel it's too early to say if we'll soon see economic improvement, but agree credit card defaults typically rise during the early months of the year and for the first time in five years, they have declined in January. Consumers also did a better job at decreasing their debt as the amount of cardholder's balance paid dropped 17.53 percent in January. It is estimated that banks wrote off over $35 billion in card debt in 2009.