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Credit Card rates dropped to their lowest ever this year. Six major credit card companies saw all time low interest rates with Bank of America Corp the only company seeing an increase.
Experts in the industry said the United States unemployment rate was at 10% and that rates were to stay high. Credit card companies are at a loss after the recent credit losses were followed by a regulation by the Congress to limit debit card transaction fees. The new regulation puts a stump on industry profits. “Charge-offs are going to come down much more slowly than they went up.” Jason Arnold of RBC Capital Markets said.
Credit card industry experts said the improving rates were only temporary and ahd the habit of falling after consumers get tax refunds. “For us, until unemployment gets back to … (levels of) significant improvement, we cannot expect to get out of this morass,” Joe Purzycki of Barclaycard US. “You’d think (economic) growth would mean more jobs, people back to work, and we’d be able to worry less about our loss picture. But we’re not at that point yet.” He added at a conference in Orlando.
Bank of America Corp shares closed at $16.35, a 1% increase and American Express Co saw its shares increase by 1.43% to close at $41.22, being the only companies who saw profits i the industry during this phase.
JPMorgan Chase & Co, Discover Financial Services and Capital One Financial Services saw a drop in their shares with Citi seeing the largest fall of 3.02% to end at $3.86.
Loans which American Express deemed uncollectible saw a drop from 7.5% to 6.7%, including their 30-day delinquency rate which dropped to 3.1%. Bank of America’s delinquencies dropped to 12.71% and its 30-day delinquency closing at 6.73. Capital One’s net charge off was at 9.86% with its 30-day delinquency at 5.07%.
Bank of America, the largest U.S. card issuer, had the highest level of net charge-offs at 12.71 percent, up from 12.54 percent, but its 30-day delinquencies dropped to 6.73 percent from 7.07 percent. Citi’s net charge off rate was at 11.23, JPMorgan Chase Co. was at 9.03% , Discover Financial’s net charge off as 8.42%.
The U.S. Senate passed a bill limiting the limit consumers pay on debit card transactions. The rules will decrease the revenue credit card companies make and bring about questions of further amendments to the industry.
