September 27, 2010
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News: Card Delinquencies Down; Defaults Up
According to a recent report from Moody Investors Service, Americans continue to pay credit card payments on time. The news is just one more sign that the recession has ended. Moody's Credit Card Indices, showed that six of the top card companies including Bank of America, JPMorgan Chase & Co., Citigroup, Inc., and Capital One reported short term credit card delinquencies of 30 days or more past due decreased. Overall U.S. credit card short term delinquencies fell to 4.70 percent down from 4.93 percent the previous month. Short term delinquencies are important to note because they reflect what the U.S. can expect to see over the new few months with card defaults.
The country wasn't as fortunate with credit card defaults. Five of the six top U.S. card issuers reported that write-offs increased. American Express was the only card issuer in the top six that reported defaults flat. Overall, credit card defaults rose to 10.03 percent up from 9.3 percent reported for the previous month. The new was disappointing because last month was the first time since April 2009 that card defaults for the U.S. were below the 10 percent mark. Defaults tend to mirror the unemployment rate which also has been hovering around the 10 percent mark.
Moody's analyst Jeffrey Hibbs said that improved performance of credit card portfolios is due to lenders implementing stricter underwriting standard and reducing risky cardholders' credit limits. Up until recently, lenders virtually cut off marketing new card accounts. As the economy continues to lag, stimulation requires increased consumer spending. On the other hand, consumers have been stung by the recent recession and cut back on spending. Ironically, although a good move for consumers, not such a good move for the economy which depends on consumer spending. Recently, lenders have begun to throw out more card offers; however, they are targeting prime customers only. If you haven't been paying your bills on time or at all, experts say…..don't expect one of these offers to come flying your way.