Major credit card lenders in the country have recently reported that fewer delinquencies have been seen, as less cardholders are falling behind on payments. This represents another indication that economic recovery is underway. Credit card issuers like Citigroup, American Express Co. and Bank of America have said that the number of customers making late payments has also dropped to its lowest levels of this year in October.
Delinquencies are usually seen as a sign that customers are having problems in making bill payments. This is also an indication of future losses for the lenders. The steady decrease of the number of delinquencies, and the rate of late payments has shown that credit card customers have seen through the worst of the economic crisis. Consumers seem to feel more confident now of paying their bills. The delinquency rates in October are better than expected. The trends of the season also show some good credit performance, although there is only slow recovery in the road ahead.
With customers stopping to use tax refunds to pay balances and start shopping for the holiday season, the quality of credit tends to go down in the second half of the year. In another sign of growing customer confidence and receding economic crisis, there has been a rise in the sales of US retailers, which is more than what was expected in October. There is still some uncertainty though, as a high rate of unemployment is lowering the recovery rate. Charge off rates have been reduced by most lenders, but are still high considering historical numbers. There is shrinkage in loan portfolios, with most customers staying away from new debt. The charge off rate for Bank of America for example, has gone over 10% after briefly falling to 9.99%. The largest consumer bank in the country has the worst card loss rate, which has dropped to some extent from 13% at the start of the year. The delinquency rate has fallen to 5.6%.
American Express meanwhile, has reported the lowest charge-off level and rate of delinquencies amongst all major card lenders. American Express, similar to Discover Financial Services, lends directly to the customers competing with Visa and MasterCard in payment processing. American Express is now looking to increase the transaction processing business, and has reduced lending to all but high credit customers who usually pay off their bills on time.