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Credit card delinquencies in April continued to drop for the fourth month in a row in April, an indication that consumer finances could be stabilizing, even as unemployment rates remain in record territory. In addition, all but one of the six major U.S. credit card issuers saw credit card defaults drop as well.
Credit card delinquencies are a measure of the number of credit card holders more than 30 days behind with their credit card payments. They are early-stage indicators of future credit card defaults, i.e. credit card debt that card issuers have been forced to write off.
Even as both credit card delinquencies and defaults showed one of the best performances in more than a year, analysts warned that the continuing high unemployment rates are likely to keep credit card defaults in record territory. In addition, some point out that many consumers use April tax refunds to pare down credit card debt, possibly resulting in a more positive picture of consumer finances.
Bank of America continued reporting the highest credit card charge-offs, which increased from 12.54 percent in March to 12.71 percent; the only increase among card issuers. The increase, however, should be viewed in the context of the steep drop in defaults BofA saw from February to March, when charge-offs plummeted from 13.51 percent to 12.54 percent. BofA 30-day delinquencies went down in April from 7.07 to 6.73 percent, indicating further improvements in write-off rates down the road.
Citigroup had the second higest level of credit card write-offs, but reported a modest decrease in defaults from an annual rate of 11.55 percent in March to 11.23 percent in April; Citi delinquencies declined as well.
Capital One saw the most dramatic drop in credit card defaults, which plunged by more than a percent from an annual rate of 10.87 percent to 9.68 percent; reversing the March trend, when Capital One reported rising credit card write-offs. Capital One delinquencies also fell, from 5.30 percent to 5.07 percent.
Consumers holding Chase credit cards defaulted less on credit card debt as well; with Chase write-offs dropping from 9.51 percent to 9.03 percent and delinquencies from 4.51 percent to 4.40 percent. Discover Card saw a modest drop in charge-offs from 8.51 percent in March to 8.42 percent in April, while delinquencies declined from 5.39 percent to 5.20 percent.
American Express continued to be the best performer among the six major credit card issuers, reporting default at almost half of those of Bank of America. Amex credit card write-offs dropped to an annual rate of 6.7 percent in April from 7.5 percent in March; a more than 10 percent decline, which brings Amex credit card defaults close to the pre-credit crisis averages for most card issuers. Amex delinquencies also fell modestly, to 3.1 percent 3.3 percent. American Express caters to high-income cardholders with more discretionary income, who have been less affected by the economic crisis and high unemployment rates.
