Lesser number of Americans refrained from making their credit card payments on time in the month of July which is clear indication that customers are making an effort to manage their debts better. As per the financial analysts, while there has definitely been a significant dip in the rate of charge offs, there has been no signs of customer spending increasing anytime soon.
A number of leading credit card issuers in the United States including JP Morgan Chase, CitiGroup Inc. and Bank of America revealed on Friday that the number of loans that were written off in the month on July was significantly lower than what they expected. While most of the banks reported a reduction in the number of write-offs, there were a few banks that still didn`t notice the difference.
Moshe Orenbuch, an analyst with Credit Suisse said that the number of delinquencies that get reported in the latter half of the year are considerably higher than that of the first half; however, this year the banks seem to have beaten the trend for better.
The number of charge-offs increase in the second half of the year since people stop getting their tax refunds from the government, thus making it difficult to pay off their dues on time. Orenbuch said that if credit card lenders continue to see a fall in the delinquency rate then they are sure to make more profits that they have originally forecast.
This year heralded good news to the credit card industry since the number of delinquent accounts is on the decrease right from January. The fact that the trend is continuing even into July is the reason for the banks to cheer because despite an increase in the unemployment rate and still reeling under an uncertain economic situation, consumers in the United States are still paying off their dues on time.
Michael Taiano, a financial analyst with Sandler O`Neill said that this is surely a positive sign of a reviving economic situation. Despite this, he had a word of caution. He said that customers paying their dues on time does not imply they are willing to spend using their cards.
Jason Arnold, RBC Capital Markets` financial analyst also said that the fall in the rate of delinquencies is indeed good news. He also went on to say that he was sure about this positive trend continuing into the future as well.