Credit Card Delinquencies Likely Signal Higher Charge-Offs Ahead

Gallery.creditcard2Credit card delinquency rates in October continued to rise, and this trend will likely lead to higher  industry-wide charge-offs – loans considered uncollectible – in the coming months, said Moody’s Investor’s Service.
Loans at least 30 days overdue climbed to 6.12 percent in October from 5.97 percent in September, while the credit card charge-off rate fell to 10.04 percent in October, the second consecutive month of improvement since peaking in August at 11.49 percent, Moody’s reported.
But it is the deinquency rate that credit card issuers use as a measure of future charge-offs. Moody’s forecasts charge-offs to peak  as high as 13 perceint in mid-2010.
Three of the top credit card lenders recorded delinquency rate increases for October – Chase, Capital One and Discover. American Express was the only major card issuer not to report a higher delinquency rate.
Another reason for concern among card issuers: delinquencies mostly move in the same direction as the unemployment rate, which hit 10.2 percent this month, the highest level since 1983. The jobless rate is expected to climb higher in coming months.
Hourse before Moody’s released its report Monday, TransUnion issued its quarterly credit card delinquency analysis, reporting somewhat more positive results.
The national credit card delinquency rate, borrowers 90 days or more delinquent on one or more of their bank-issued credit cards, dropped to 1.10 percent in the third quarter of 2009, down 5.98 percent over the previous quarter. In the year-to-year comparison, however, credit card delinquencies remained flat from 1.09 percent in the third quarter  of 2008, TransUnion said.
The credit bureau also reported that average credit card  debt, the total owed on all bank-issued credit cards for an individual, inched downward nationally 1.87 percent to $5,612 from the previous quarter’s $5,719.
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