Consumer behavior resulted in a mixed bag of results for the biggest credit card companies in September, with overall defaults falling, but late payments – referred to as delinquencies – are on the upswing.
The up-tick in delinquencies, which serves as an indicator of future credit losses or defaults, surged more than expected in September, and is expected to continue upward momentum as the jobless rate escalates. Unemployment and delinquency rates are commonly tied together, as more people stop paying their credit cards as they lose their jobs.
Unemployment rose to 9.8 percent in September, a 26-year high. It is expected that the jobless rate will surpass 10 percent.
Adding to the troubling scenario is the Holiday season, which can result in more financially-strapped consumers relying on credit cards, making it more difficult for delinquency rates to recover early next year.
Analysts now say that credit card losses for the largest card issuers may not peak until next year.
Here’s a snapshot of delinquency rates for September:
- American Express: The only exception, with delinquencies holding at 4.1 percent.
- Bank of America: Rose to 7.53 percent from 7.47 percent.
- Capital One: Up to 5.38 percent from 5.09 percent.
- Chase: Climbed to 4.69 percent from 4.48 percent.
- Citigroup: Up 5.5 percent from 5.38 percent.
- Discover: Rose to 5.57 percent from 5.35 percent.
For now, though, credit card companies are seeing a dip in defaults. For September, the default rate – or charge-offs – loans credit issuers do not expect to be repaid – slowed, to some extent because consumers who have a steady income are spending less, saving more and paying off their debts.
Here’s a rundown of the charge-off rates:
- American Express said its charge-off rate fell to 8.4 percent in September from 9.0 percent in August.
- Bank of America reported its rate fell to 14.25 percent from 14.54.
- Capital One said its rate rose to 9.77 percent from 9.32.
- Chase recorded a decline to 8.12 percent from 8.73 percent.
- Citigroup registered the biggest drop in defaults to 10.15 percent from 12.14 percent.
- Discover said its rate fell to 8.69 percent from 9.16 percent.