ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Other » U.S. Credit Card Payments Show Improvement

U.S. Credit Card Payments Show Improvement

August 29, 2009 | Updated on August 29, 2009
Add to Favorites:
The content is accurate at the time of publication and is subject to change.

The credit industry's hopes were raised this month as Moody's released the most recent set of figures about charge-off rates and delinquency rates. American cardholders showed significant improvement regarding delayed payments, with the latest figures the first drops in charge-offs and delinquencies since September of last year.

According to the date collected by Moody's, the charge-off rates for credit cards in July was 10.52. The figure is significantly lower than the record-high 10.76 reported in June. The delinquency rate also dropped to 5.73 in July from 5.81 the month before. Analysts say that the latest decline in delinquent payments has been the fourth consecutive one drop in recent months, fueling hopes of the credit industry's recovery.

The latest developments come at the heels of recent data suggesting an improving job market. Recent surveys have suggested that the unemployment rate is showing signs of improvement. Experts say that this is importance since charge-off rates are strongly linked to jobless figures. With many economists predicting more Americans to lose jobs in the next few months, there are fears that the charge-off rate can climb before the end of the year. If the jobless rate climbs, then the credit industry might suffer another crucial blow.

Nessa Feddis, American Bankers Association senior counsel and vice president, says that it the latest improvements are raising optimism, the figures are still relatively high. Experts like Feddis believe that the recent developments may not be strong indicators of a turnaround or an outright economic recovery.

Feddis also says that most banks and creditors are still trying to recover from the mortgage industry meltdown and are now faced with impending losses due to the charge-offs and delinquencies. She expects card companies to lose money in the coming months and possibly even into 2010.

Despite the declining charge-off and delinquency rates, Moody's stuck to its prediction of the charge-off rates peaking at 12 or 13 percent by the middle of next year. The financial agency based this prediction on the expected high unemployment rate of 10 or 10.5 percent next year.

Researchers at Moody's say that the improvements could be seasonal. Charge-offs and delinquencies usually taper off during April when most cardholders receive tax refunds and use these to pay off their debt. With millions of students expected to return to school, however, analysts are expecting increased spending and higher delinquency rates. If cardholders fail to settle their debts in time, then card issuers will have to write them off as losses, leading to higher charge-off rates.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!