Credit Card Data Points to Economic Recovery

After news story and headlines reporting nothing but gloom and doom in the financial sector, it seems as if there is some light at the end of the tunnel. While unemployment rates are high and foreclosure rates don’t seem to be going anywhere either, credit card default rates and late payment rates seem to be on the decline. This, some contemplate, may be an indication that the economy is heading out of the recession and into a period of recovery.

Credit Card Data

According to the Associated Press, more credit card holders paid their credit card bills on time in March 2011 than in the previous few years. Some of the top credit card companies — Bank of America, Chase, Discover, American Express, and Capital One — all report that the overall number of delinquent accounts on record is on the decline. The industry is reporting that the delinquency rate is the lowest it’s been since 2008.

Charge-Offs

Bank of America boasts the biggest improvement in the number of accounts it has had to charge-off. Right along with Bank of America is Discover. Even with it showing the biggest signs of improvement, Bank of America still retains the highest charge-off rate in the industry at 8.18%. American Express brings up the rear with the lowest charge-off rate at 3.7%. This is attributed to the fact that American Express tends to cater to a more affluent demographic.

According to the Federal Reserve, the average charge-off rate for credit card companies reached its highest point in the second quarter of 2010 — 10.9%. By the end of the fourth quarter, however, the average rate declined to 7.7% of credit card accounts in a charge-off status.

Economic Recovery

Analysts and economists use a myriad of factors to determine indications of economic recovery. One of these is the number of credit card account default rates and late payments. While the previous two years have had an increase in the number of accounts in default and that the credit card companies have had to charge off, the decline in the problem accounts is one factor that indicates a possible economic recovery.

Kristie Lorette

Kristie Lorette is an award winning credit specialist and an MBA graduate of Nova Southeastern University. Her lengthy tenure includes service at Merrill Lynch where she oversaw a $300 million dollar portfolio and 16 branches. At Merrill Lynch, Kristie specialized in consumer issues related to credit and mortgages. As a writer and researcher in personal finance, Kristie is also a contributor to Yahoo! Shine, Quizzle.com, Moneysmartlife.com and many other online and print publications.