Find the best credit card offers online.Three leading credit card issuers have disclosed better-than-foreseen delinquency and charge-off rates last month but the worst is far from over.
These banks, Bank of America, Capital One and Discover, remain in a stressed environment, with consumers still emerging from peaking rates of unemployment. As it is, these delinquency and charge-offs remain high.
But these issuers are taking advantage of people defaulting on their home loans to pay off their credit cards. The usual practice was actually the other way around, with credit cards defaulted to pay mortgages, leading to increased credit card delinquencies.
According to studies, around 6.6 percent of consumers have been current this year on their credit accounts while remaining delinquent on their mortgages. This rose from 4.8 percent in 2008.
To further check delinquency, people are still cutting back on credit card use, with the outstanding credit card debt falling annually. This year it fell to $855 billion from $980 billion in 2008. This year, it is predicted to drop another $80 billion.
Bank of America reported that loans that are past 30 days due have fallen to 7.35 percent last month from 7.44 percent in December. Charge-offs, on the other hand, slid from 13.53 percent in December to 13.25 percent last month.
However, Capital One maintained it had 30-day delinquencies rising to 5.8 per cent from 5.78 percent the previous year. Charge-offs were also up from 10.14 per cent to 10.41 percent. Discover’s delinquency rate, meanwhile, rose from 5.49 percent to 5.55 percent. Charge-offs slid from 8.68 percent to 8.58 percent.
Seasonal trends for both key credit indicators are difficult to determine. Such charge-offs tend to climb early in the year with people trying to settle holiday debts, while bankruptcy rates soar as spring nears.
With delinquency seen to improve further, lesser credit card defaults and fewer charge-offs are expected. According to analysts, this can be attained if bankruptcies will remain low and unemployment is checked.
As unemployment drifts around the 10 percent range and household finances remain under terrible strain, issuers and lenders still see their delinquencies and charge-offs rising in the near term. But these are slowing down and improving even as net charge-offs have increased to 10.5 percent in January.
This may not be far off from the highest net charge-off rate of 10.8% reported in August 2009, but the 5.8 percent net decline in data delinquency rates, which is being used by issuers and lenders to foresee future defaults, have led analysts to predict lesser charge-offs in the future.
