Credit & Debit Cards

Credit Card Delinquencies Rates Fall, as Does Usage

Posted on Friday, December 17, 2010


Credit card delinquency rates fell at major U.S. lenders in November as fewer consumers fell behind on their bill payments, signaling that they are recovering from the stress of the financial crisis.
But consumers are also avoiding racking up more debt on their credit cards, even during the holiday shopping season, in a sign that lenders will be struggling to rebuild their businesses for some time to come.
Credit card lenders Bank of America , JPMorgan Chase , Discover Financial Services , Capital One Financial and American Express said the rate of late payments fell to their lowest levels this year in November.
"We thought on a seasonal basis we'd see some weakness, and instead we saw a relatively benign to a very positive picture," analyst Henry Coffey of Sterne, Agee & Leach said. "We were more pleased than displeased with the numbers."
Delinquencies are the first sign that consumers are having trouble paying their bills and indicators of future losses. The steady decline in delinquencies this year at the top U.S. credit-card lenders signals that American consumers have recovered from the worst of the financial crisis.
Charge-offs offs ticked up slightly at some lenders, including JPMorgan and Capital One Financial Corp, but they were still much lower than at the beginning of the year.
Losses — and loans — on credit cards usually rise at the end of the year, as consumers splurge during the holiday shopping season.
But consumers are reluctant to take on more debt this year. Only 16.3 percent of consumers polled used credit cards over the Black Friday weekend this year, down from 30.9 percent last year and an all-time low, according to a survey by America's Research Group and UBS.
Gradual Recovery
Lenders file monthly credit-card performance reports with the U.S. Securities and Exchange Commission.
Bank of America had the worst credit card loss rate in November — 9.92 percent, down from 10.15 percent in October. The largest U.S. consumer bank has recovered somewhat from the beginning of 2010, when charge-offs were more than 13 percent. Its delinquency rate fell to 5.47 percent in November from 5.6 percent in October.
Citigroup's charge-offs dropped to 9.4 percent in November from 10.27 percent in October. Its delinquency rate declined to 4.71 percent from 4.74 percent.
At the other end of the spectrum, American Express Co continued to report the lowest level of charge-offs and delinquencies among the major U.S. lenders.
The credit-card lender and transaction-processing network said its charge-off rate fell to 4.4 percent in November from 4.7 percent in October. Delinquencies fell to 2.2 percent from 2.3 percent.
American Express is increasingly looking to its transaction-processing business for growth and has cut back on lending to all but affluent consumers who mostly pay their bills in full every month.
At JPMorgan, which is increasingly competing with American Express for the most affluent credit-card customers, the delinquency rate fell to 3.68 percent in November from 3.81 percent in October. Its charge-off rate edged up to 7.16 percent from 7 percent.
Like American Express, Discover Financial Serviceslends directly to consumers but also competes with Visa and MasterCard to process credit card transactions for banks. Discover said delinquencies fell to 4.15 percent in November from 4.34 percent in October. Its charge-offs dropped to 6.72 percent from 6.83 percent.
Capital One said accounts delinquent for at least 30 days fell to 4.26 percent in November from 4.45 percent in October.
Its charge-off rate rose to 7.56 percent from 7.26 percent but was still much improved from more than 10 percent in January.
Shares of the six major lenders were mostly lower Wednesday.Reuters


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