According to a recent report published by Fitch, delinquency rates for credit card payments (60 or more days overdue) has declined for the fifth consecutive month. Along with the lowest rate in 17 months of 4.01% (from 4.33% a year ago) and more consumers working to pay down their credit card debt, the drop is good news to banks and credit card issuers who consider delinquency rates when predicting future losses. In addition, there has been a three month decline in the rate for payments 30 days or more overdue, falling to 5.27%.
Financial experts are hopeful that the economy may be slowly improving. Another positive sign comes from a recently released report from the U.S. Commerce Department. Consumer spending grew by 0.2% in May.
Lower delinquency rates typically result in fewer charge offs; however, a small increase in charges offs was noted. Several issuers saw the positive result of fewer charge offs, underscoring a growing belief that losses have peaked. Improvements include:
- Chase – delinquencies fell .08% to 8.95% in April
- Capital One – fourth straight drop in delinquenies to 4.8%.
- Discover – delinquencies dropped to 4.95%
Experts are cautiously optimistic but admit that the level of losses remain high by historical standards. One area that continues to be of concern is the employment situation. “Employment trends remain vital to any meaningful and sustained improvement taking hold,” Fitch Ratings Managing Director, Michael Dean said.