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Several U.S. credit card issuers continue to struggle with rising credit card defaults, according to monthly reports issued on Friday. However, for some card issuers, losses are leveling out or even improving, potentially a sign that the consumer credit card crisis may be bottoming out.
The high credit card charge-offs follow a year of high unemployment and an otherwise weak economy, which continue to take its toll on consumers’ finances.
Bank of America for months has struggled with the highest credit card defaults of all major U.S. card issuers, and December was no exception. BofA reported that charge-offs increased to 13.53 percent in December, up from 13 percent in November. Bank of America has taken a $4.7 billion hit on its credit card portfolio over the past five quarters alone. The huge losses at BofA are caused in part by record charge-offs in its small business credit cards division.
Capital One also was hit by rising credit card defaults, with write-offs increasing to 10.14 percent in December from 9.60 percent in November.
Other major card issuers reported declining defaults. Citigroup saw charge-offs decline to an annualized 9.56 percent in December vs. 10.29 percent in November. Delinquencies (loans at least 30 days behind in payments, but still considered collectible) were also down, to 5.62 percent. Discover cards also reported a modest drop in credit card charge-offs, down to 8.68 percent from 8.98 percent in November. The delinquency rate also dropped slightly, to 5.49 percent from 5.65 percent in November.
American Express continued its month-long streak of steadily improving credit card earnings, with charge-offs declining to 7.1 percent from 7.6 percent in November, the lowest among all major U.S. card issuers. On a quarterly basis, defaults dropped from 8.9 percent in the third quarter to 7.5 percent in the fourth. Amex delinquencies also fell slightly, to 3.7 percent from 3.9 percent in November.
Chase cards, a unit of JP Morgan Chase and the largest U.S. credit card issuer, reported that write-offs declined to 7.11 percent on an annualized basis, down from 8.81 percent in November. However, that drop largely derives from a payment holiday the bank offered its credit cardholders earlier in the year, according to Chase CEO Michael Cavanagh.
Most notably, all card issuers reported a decline in credit card delinquencies, i.e. loans at least 30 days overdue. Delinquencies are an indicator of future charge-offs, and the decline across the board has many analysts predicting that credit card defaults may be stabilizing and leveling out towards the middle of 2010.
