July 27, 2010
-
News: Moody's July Credit Card Indices Report
More evidence that the recession has ended was released by Moody's Investors Service on Monday. According to Moody's Credit Card Indices, overall U.S. credit card defaults fell to 10.28 percent in June, .43 percent below May's number. Card defaults which are account balances that lenders do not expect to recover from the cardholder, were also below the 10.76 percent figure for the same time last year; being the first annual decrease since December 2006. Moody's report speculates that credit card defaults have peaked and that we should see a slow decline throughout the balance of 2010. The charge-off rate typically mirrors the U.S. unemployment rate which continues to hover around the 10 percent mark.
Credit card delinquencies of 30 days or more also dropped for the 8th consecutive month in June to 5.08 percent; the lowest since November, 2008. On the negative side, Moody's indices indicate that early stage card delinquencies of 30 days will begin to increase slowly and continue throughout the year. Some experts speculate it could stem from consumer over spending during summer vacations and the anticipation of the holiday season. Jeffrey Hibbs, a Moody's analyst, said that the company expects credit card delinquencies to improve across the industry in the near future.
Moody's card Indices shows that the annualized percentage of income collected as a percent of total credit card loans, increased as well in June; rising 13 basis points to 23.02 percent. Moody's is a credit rating agency that performs international financial research and analysis. The company uses a standardized rating scale to measure the credit-worthiness of borrowers and maintains a 40 percent share in the world credit rating market. The indices measure the performance of asset backed securities of card receivables. The company has undergone criticism in the wake of the recession by downplaying warnings by analysts of Wall Street dangers.