According to Moody's Investors Service last July 26, credit card charge-offs have lessen last June which shows that credit card losses are easing. This is another sign that the recession is indeed ending, to the relief of many consumers everywhere in the country.
Moody's Credit Card Indices show that credit card charge-offs have gone down to 10.28%, around 43 basis points (in which one basis point is one-hundredth in a single percentage point) below to their previous level last May.
According to Moody's, this also happened in June of last year in which credit card charge-offs also lowered. In the case of last year, they were 10.76%, which was the first annual drop since December of 2006. Moody's also believed that that the charge-offs have peaked, and they expect that they would decline gradually in the next two quarters until the end of the year.
The best case outlook expects the unemployment rate would become stable at 10% in the second of 2010. While credit card delinquency rates continued to go lower for eight consecutive months, with the latest in June reaching 5.08%. This latest delinquency rating has been the lowest monthly rate since November of 2008. And the loans for delinquency rates which are 30-59 days past due, have also lowered only one basis point to 1.25% last June.
But Moody's also expected that this delinquency rate in its so-called early stages of 30 days would begin to rise this month of July and into the fall season. Some finance experts speculate that the delinquency rate increase would stem from the overspending of consumers during the summer vacations and for the anticipation of the incoming holiday season.
Jefrey Hibbs, an analyst from Moody's, stated that delinquency trends are improving over the industry as compared to last year, and would continue to do so in the near future. Hibbs also added that the delinquency rates are consistent with the company's expectations to have lower credit card charge-off rates in the incoming months head.
Moody's Card Indices also shots that the annualized percentage of income, or better known as the yield index, that was collected as the percent of the total loans of credit cards also improved last month. The yield index had risen to 23.02% by 13 basis points.
Moody's Investor Service is a credit rating agency that is known to perform financial research and analysis worldwide, and has over a 40% share of the world's credit rating market. The credit rating company uses a consistent rating scale to determine borrower's creditworthiness. Moody's Card Indices calculate and gauge the asset backed securities performance of card receivables. Moody's also had suffered much criticisms after the start of the recession when it had taken for granted warnings by analysts about the dangers.