Very few Americans actually fell behind the payments of their credit card bills, even fewer than expected in July. Consumers fared much better in terms of their debt. There has been a drop in the delinquencies too, which are touching the lowest points of the year suggesting that there wouldn`t be a recovery in spending soon, as per the analysts. Many credit card issuers including JP Morgan Chase and Co., Bank of America, American Express Co. and Citigroup Inc. reported on Friday that they have indeed written off very few bad and uncollectible loans in July. While the shares of some major credit card issuers went higher, the stock of some drifted further down.
According to an analyst at Credit Suisse, Moshe Orenbuch, the delinquencies around this season tend to go a bit worse than during the second half of the year. This makes the numbers better than what were being expected. The quality of credit available also goes bad after the consumers stop getting rebates on tax around the middle of the year. This causes them to have less spare money to pay off their outstanding debt. In spite of the seasonal drag, the decrease in delinquencies continues. Orenbuch hence feels that the credit card lenders might report less than expect losses for the current quarter.
Since the beginning of this year, it has been seen that these delinquencies, which actually are an indicator for the future losses of a company, have declined. The decline in July especially indicates that the customers in US are doing well with their debt, in spite of the uncertain state of the recovery of economy and the high rate of unemployment hovering around. A Sandler O Neill analyst, Michael Taiano feels that this is a positive sign. He however warns that the credit recovery in the consumer market is still not complete. There has been some stability and improvement but it doesn`t really mean that the consumer is excited to go back and start spending money.
According to another analyst, the improvement in delinquencies indicates that consumers are climbing out of the economic slowdown and the recession. More credit trends are expected to improve in the coming month. The amounts of write-offs have declined too. The losses at Capital One Financial and JP Morgan Chase have declined to 8% too which is quite an improvement compared to the 10% mark early in the year.