March 18, 2010
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News: The Beat Goes On
While experts say that credit card defaults will begin to level off soon, February's numbers remain high. As the beat goes on, lenders expect write-offs to continue rising. Recent monthly financial reports from major lenders, indicate that credit card delinquencies and defaults remain elevated along with high unemployment which isn't expected to lower any time soon. Lenders including: JP Morgan/Chase & Co. (JPM); Capital One Financial Corp. (COF); Bank of America Corp. (BAC); Citigroup, Inc. (C); and American Express Co. (AmEx) continue to speak out against new legislative rules that prohibit them from raising interest rates and fees as a means of recouping losses from poor performing credit card loans. Meanwhile, the Federal Reserve Board announced last week that it wants card companies to review all interest rate increases imposed ahead of the new law to determine if they were properly increased.
Capital One reported a slight decrease in U.S. credit card defaults for February to 10.19 percent from 10.41 percent the previous month; international defaults drop to 8.07 percent from 9.03 percent in January. On the other hand, BofA didn't fair as well. The bank reported a rise in credit card defaults to 13.51 percent in February up from 13.25 percent in January. However, BofA reported a decline in delinquencies of 30 days or more to 7.23 percent down from 7.35 percent in January. Citigroup also had a tuff month reporting card defaults up to 11.29 percent from 9.8 percent in January. Chase accounts performed better in February writing off 9.21 percent versus the 10.91 percent in January.
American Express the number one performer throughout the credit crisis, reported a slight increase of credit card write-offs of 7.4 percent in February up from 7 percent in January. Card delinquencies of 30 days or more remained flat at 3.6 percent. Defaults for Discover Financial Services (DFS) rose to 9.11 percent up from 8.58 percent in January. Delinquencies of 30 days or more dropped slightly from 5.55 percent to 5.5 percent. Both Discover and AmEx are unique in that they both issue cards and process payment transactions giving them the edge over giants Visa and MasterCard.