Economic Recovery Still Far Off, Credit Card Companies Still In Trouble
Despite recent headlines, economic recovery for the United States may still be a ways away. According to the latest numbers, American consumers are struggling with the economic downturn and the increasing unemployment rate. Delinquency rates are also still quite high, and rising for the majority of credit card companies. Losses from bad credit card loans also remain high.
An upcoming seasonal trend may also introduce additional financial risks to consumers and credit card companies alike. As the holiday season approaches, there is a high probability that credit card usage among American consumers may once again rise which may ultimately lead to payment problems in the future.
FBR Capital Markets analyst Scott Valentin said, “The companies aren’t out of the woods yet but they are now better able to forecast credit trends, which are more in line with seasonal trends”.
The monthly reports of credit card companies do not lend itself to signs of a recovering economy. Capital one, a card issuer which expanded to banking, said that their charge offs increased by 9.77% last September, a rise from the 9.32% it saw in August. Payments delayed by at least 39 days also rose to 5.38% in September compared to the 5.09% figure from August.
Discover said that their 30 day payment delinquencies on credit card loans packaged into bonds shot up to 5.75% last month from August’s 5.35%. However, write offs were at 8.69% last month, a considerable drop from the 9/16% rate from August.
American Express showed better performance. The company said that their 30 day delinquent payment rate was at 4.1% for both August and September. Their card loan write offs were at 8.4% last month. This already includes card loans packaged into bonds. During the month of august, the write off rate of the company was at 9%.
Among credit card companies, Bank of America reported the highest write off rate for September at 14.25%. The month before, August, the rate was at 14.54% which was also the highest rate among banks during that month.
Citigroup reported a write off rate of 10.15% for card loans during the month of September, an impressive drop from its 12.14% write off rate last August. Still, Citigroup maintains its position as the second highest bank behind Bank of America in terms of write off rates.
The Chase unit of JPMorgan Chase had a credit card charge-off rate of 8.12% for September, dropping from an 8.73% rate in August. According to Jamie Dimon, chief executive of the credit card business of JPMorgan, “Card is having a tough time”.
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