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Despite persistent high unemployment and remaining uncertainties about the economy, fewer Americans fell behind on their credit card debt in July. All major credit card issuers reported decreases in both July write-offs and late payments, putting credit card losses at their lowest levels yet this year.
Capital One took the lead with one of the steepest decreases in charge-offs, reporting a decline in defaults from 9.28 percent in June to 8.13 percent in July. Capital One delinquencies also dropped, from 4.79 percent down to 4.66 percent. Credit card delinquencies are payments more than 30 days late; they are typically a reliable indicator of future credit card defaults.
JPMorgan Chase also reported the lowest charge-off rates for the year, with defaults declining to 7.95 percent from last month’s 8.38 percent. Chase delinquencies fell as well, dropping from 4.13 percent in June to 4.06 percent in July. Discover Card similarly saw a new low this year, Discover credit card write-offs declined from 8 percent to 7.28 percent in July and late payments inched down from 4.81 percent to 4.72 percent.
Bank of America, which has shouldered some of the highest credit card losses among all major issuers, saw charge-offs move down from 11.98 percent to 11.39 percent in July. The decline solidifies the sharp decrease from 12.7 percent to 11.98 percent in annualized charge-off rates reported by BofA from May to June, an almost 10 percent decline month over month. BofA also reported its lowest delinquency rates so far this year, as late payments declined from 6.16 percent on an annualized basis in June to 5.92 percent in July.
Citigroup, which has been second only to BofA in credit card losses, took the unusual step of restating its losses all the way back to January. The move followed an announcement that the card issuer had discovered a flaw in the way net losses were calculated, causing some accounts to be counted twice, artificially inflating default rates. As a result, Citi lowered the numbers for June write-offs from the 11.46 percent first reported to 10.72 percent. At the same time, the card issuer reported a steep decline in credit card write-offs for July, taking defaults from 10.72 percent in June to 9.10 percent in July, an almost 15 percent drop month over month.
The number of consumers paying their Citi cards late remained high, however. Despite a modest improvement in credit card delinquency rates, Citi had the highest late payment rates of all major card issuers. Payments past-due by 30 days or more stood at 8.32 percent in July, down from 8.58 percent in June.
American Express, which of all major card issuers has been least affected by the economic downturn, continued to report the lowest default rates of all major issuers. Amex credit card losses dropped to 5.4 percent in July, down from June’s 5.9 percent, and close to the territory which before the economic downturn was considered “normal” credit card default levels for most card issuers. American Express delinquencies inched further down as well, from 2.7 percent in June to 2.6 percent in July.
While delinquency and default rates remain high for most card issuers in comparison to pre-recession levels, analysts saw the across-the-board decline in both delinquencies and defaults as an encouraging sign that consumer finances are stabilizing, despite the continuing high unemployment levels and weak economy.
