Things Improve For Credit Card Companies In July Says Moody

Moody recently released a report stating that July saw an overall improvement for credit card companies after a string of slow months. Moody Investor Services keeps tabs on credit card trends and, in the report they released last Friday, they said that credit card company performance saw an improvement on all categories for the month of July.

According to moody, the charge-off rates finally dropped to 10.52%, after reaching 10.76% in June which was an all time high record. The charge-off rate is a measure of the credit card account balances which are written off as uncollectible shown as an annual percentage of the overall outstanding principal balance. This is the first month-over-month improvement that the rate showed since September of last year.

The lower charge-off rate is primarily due to an increase in payments that credit card holders are making as some of them begin to get a handle on their finances. The index from Moody shows that payment rates saw a sharp rise in July. It reached 17.43% which is the highest it has been since October of last year. Figures of the payment rate are taken as a measure of the average principal amount that card holders pay off every month measured against the overall outstanding principal balance. This increase in the payment rate was also seen on all the major credit card companies of the United States which include Discover, American Express and Citibank.

The increase in payment rate also meant a decline the delinquency rate among credit card companies. According to Moody’s index, the overall delinquency rate among credit card companies dropped to 5.73%. This is the lowest figure that the delinquency rate has been for the 2009 year. The delinquency rate is the measure of the account balances proportion that a monthly payment is delinquent for more than thirty days.

However, according to Moody senior vice president William Black, the trend may end in July. According to him, July is marked as an inflection point in seasonal trends. Previous months starting from May had seen improvements in credit card company performances which may culminate in July. By the second half of the year, Black says that delinquencies may once again rise as consumers deal with back to school expenses and with holiday expenses later in the year. These will most likely negatively affect credit card payments.

Black also believes that the charge-off rates will most likely hit a high in the middle of 2010, around 12% to 13%. This will be caused by the anticipated unemployment rate peak which will be at 10% to 10.5%.