Now that all of the data is in, The Associated Press confirms that five out of the six of the largest credit card issuers have reported reductions in late payments and defaults for the month of April. Only Bank of America said that default rates rose from 8.18% in March to 8.25% in April. Capital One experienced the highest drop in defaults by being down by 4.97%, while American Express had the lowest default rate at 3.5%.
Reasons for the Decline in Defaults
According to Bloomberg, the primary reason for the decline in default rates on credit cards is that the consumers who defaulted were no longer able to qualify for new credit cards. The consumers that were already making their payments on time and were not in danger of default are the same consumers making their payments today and avoiding defaulting.
According to the Federal Reserve, the decline in default rates points to something else altogether. The Fed says it illustrates a motivation by consumers to reduce their credit card debt. March credit card debt wasat $785.04 billion, which was slightly lower than the February figure.
The Fed and numerous economists also see the decline in defaults as a sign that consumers are taking back control of their finances. Consumers are going back to work and now managing to pay off their credit cards and other debts from the past few years.
Companies Experiencing the Decline
- Capital One Financial Corp. experienced the biggest decline in defaults. In fact, it was the biggest decline the company has seen since the latter part of 2007.
- American Express Co., in addition to enjoying the lowest default rate, also boasted the lowest late payment rate at 1.7%.
- Citigroup Inc. had a late payment rate of 3.87%, which is a decline from the 4.21% the company experienced in March.
- Discover Financial Services had a 2.86% decline in its default rates in April.
- JPMorgan Chase & Co. experienced a decline in late payments to3.15%.