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For the fifth month in a row, credit card delinquencies dropped in May, indicating that fewer Americans are struggling to keep up with their credit card payments despite the continued economic slow-down.
All the major card issuers reported lower delinquencies in their credit card portfolio for May, as payments at least 30 days late fell to their lowest levels this year. Delinquencies are typically a predictor of future credit card defaults, i.e. credit card debt written off as uncollectible. Credit card write-offs did show signs of improvement for most lenders as well, following the five months of declining late payments. The exceptions were Bank of America and Discover, which both saw defaults climb upwards.
Bank of American continued to report the highest levels of defaults among all the major credit card lenders. BofA credit card write-offs climbed to 13.33 percent from April’s 12.71 percent, while delinquencies dropped to 6.39 percent from 6.73 in April, an indication that BofA defaults could be turning a corner.
Citigroup saw modest improvements in both categories, with credit card defaults dropping to 11.16 percent from 11.23 percent, and delinquencies easing from April’s 5.85 percent to 5.59 percent in May. Capital One posted similarly modest declines, with net charge-offs decreasing from 9.68 percent in April to 9.48 percent in May; the number of Capital One cardholders with payments more than 30 days late inched down to 4.80 percent from 5.07 percent.
American Express continued to post the lowest levels of defaults, Amex’s booked credit card losses dropped to an annualized rate of 6.3 percent compared to 6.7 percent in May, bringing Amex close to “normal” territory for credit card write-offs. Amex delinquencies continued to improve as well, dropping to 2.9 percent in May from 3.1 percent in April.
Both Chase and Discover stayed in the mid-range of credit card defaults, with Chase write-offs dropping below 9 percent for the first time since the onset of the credit crisis. Chase’s net annualized charge-offs fell to 8.95 percent in May, down from 9.03 percent in April. Chase delinquencies also dropped, from 4.4 percent to 4.22 percent in May. And while Discover stayed in the mid-range of defaults, its annualized net write-off rate climbed to 8.82 percent in May from 8.42 percent in April, after two months of declining charge-offs. Discover late payments, however, continued to decline, from 5.2 percent in April to 4.95 percent in May.
The modest improvements in late credit card payments across the board are a hopeful sign that the economy continues to stabilize. However, with unemployment rates still hovering around 10 percent, credit card lenders will likely not see write-offs of bad credit card debt return to normal levels anytime soon.
