Credit Cards Doing Much Better Than Expected

Banks have seen a positive sign this July as they saw fewer delinquencies than expected. Majority of the Americans have made their credit card payments on time in July bringing the steep drop in delinquencies which are the lowest this year. Analysts however point out that though the delinquencies have dropped, the consumer spending may be unaffected by it.

Moshe Orenbuch, analyst at Credit Suisse said that delinquencies get worse seasonally which is usually around the second half of the year. So the delinquency numbers seen currently are certainly a positive sign and are better than expected.

Substantiating this fact is the news that fewer loans were written off by major banks in July which include Bank of America Corp, Citigroup Inc, American Express Co and JP Morgan Chase & Co.

As per the analysts view, the delinquencies are lesser in number as long as consumers receive their tax-refunds that contributes to clearing off their debts. The consumers stop receiving their refunds after mid-year and the rise in delinquencies follows.

It is clear that the U.S economy is uncertain owing to the high unemployment rate. This is coupled with a slow economic recovery, but consumers are able to manage their debts better than before despite the situation. According to Orenbuch, if the delinquencies continue to decline, the credit card lenders will have a chance to cheer with lesser loss than expected during the current quarter.

Micheal Taiano, an analyst at Sandler O’Neil said that it is a positive sign, but also left a word of caution as far as the credit recovery is concerned. He said that though the current situation looks promising, consumers may still be raring to go back to spending heavily.

This comes as welcome news to credit card issuers who are anticipating trouble because of CARD Act coming into effect. Earlier, banks had commented that they would incur great losses if they present all disclosures to customers as directed by the Act. Banks also face a threat from many organizations that are working to safeguard credit card customers from being harassed by the banks.

Customers are now making informed decisions rather than blindly signing on the dotted line before agreeing to use the credit card. Further, new technologies like paying bills through Smartphone are in the experimental stage and may change the way business runs today.

This study only reveals that banks can still remain undeterred by the various new developments in the industry.

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