With signs of spring in the air in most parts of the country, credit card issuers may have to wait a while longer before they emerge from the icy grip of the record credit card defaults, which most card issuers have been struggling with over the past year.
Consumers’ ability to shoulder their credit card debt is gauged by two main indices: default (or charge-off) rates, which indicate how much debt credit card companies have written off as uncollectible, and delinquency rates, which track the percentage of late payments. Delinquency rates are typically an indicator of future default rates.
While a few credit card issuers reported improvements in both categories in January, the February numbers were decidedly mixed. Citigroup saw a spike in defaults from an annualized 9.8 percent in January to 11.29 percent in February, more than a 15 percent increase month over month. Citi also posted an increase in delinquencies: up from 5.75 percent at the start of the year to 5.94 percent last month, a sign that Citi might be continuing to struggle with high defaults at least in the near future.
Bank of America, which has long shouldered some of the highest charge-off rates, saw write-offs sneaking back up in February, from 13.25 percent to 13.51 percent, after reporting the first modest month-over-month drop in credit card defaults for more than five months in January. BofA delinquencies improved slightly for the third month in a row, however, dropping from 7.35 percent in January to 7.23 percent in February, indicating that BofA defaults may be leveling out over the next few months.
Both Discover and American Express reported increased credit card defaults as well. Discover Financial Services posted an increase in write-offs from 8.58 percent in January to 9.11 percent in February. Amex, which has long held the record for the lowest default rates among credit card issuers, saw a rise in write-offs for the first time in months, bringing February defaults back up to 7.4 percent from 7 percent in January. However, AMEX credit card delinquencies remained unchanged at a modest 3.6 percent, and Discover’s late payment rates dropped slightly from 5.55 percent down to February’s 5.50 percent.
On the bright side, JPMorgan Chase saw a steep decline in credit card defaults, which dropped from 10.91 percent in January to 9.21 percent in February. Chase delinquencies also dropped, from 4.75 percent in January to 4.67 percent last month.
Capital One also bucked the trend, reporting improvements in both defaults and delinquencies in February, after five months of steadily rising write-offs. Capital One write-offs dropped modestly from 10.41 percent to 10.19 percent month over month, while delinquency rates dropped from 5.8 percent in January to 5.51 percent in February.
While the numbers are mixed, most credit card companies suggest that losses have already peaked, either in the last quarter of last year or in the early part of this year, according to Reuters.
