A recent report from Moody Investors Service showed that Americans have continued to make their card payments on time. This news turns out to be another sign that the recession has indeed ended. The credit card indices from Moody also showed that six of the top card companies that include Citigroup, Bank of America, Capital One, JPMorgan Chase & Co. have reported that there has been a decrease in the short term credit card delinquencies. The overall national average for credit card delinquencies has fallen to 4.7% and this figure has come down from 4.93% in the previous month. These short term credit card delinquencies turn out to be quite important as these numbers will show what the country can expect in the coming months as far as card defaults are concerned.
However, the good news doesn't extend to credit card defaults where five of the top six credit card companies reported that there has been an increase in write-offs. The defaults remained flat only for American Express amongst the top 6 credit card issuers. On a national average basis, the credit card defaults have increased from a single digit 9.3% to a double digit 10.03% in the previous month. This turns out to be disappointing news after last month witnessed the first time that the card default rate had fallen to single digit since April 2009. The defaults in credit card debt are a good indicator and tightly coupled with the unemployment rates which are hovering around 10% as well.
According to analysts from Moody, the improved performance of credit cards as far as delinquencies are concerned are more because of the stricter standards of the lenders, be it in underwriting or through reducing the credit limits of risky credit card customers. Until recently in fact, new card accounts were virtually cut off. During the current economic lag, customer spending is very important to provide the necessary stimulation. However, the customers have been impacted by the recent recession and have cut back on their spending habits. Interestingly although the cut back in spending augurs well for the consumers, it doesn't augur well for the economy which depends a great deal on the consumer spending. Lenders too are providing more credit card offers to customers, although they are targeting some prime customers only instead of offering cards to a wider audience. These offers are certainly not for those who don't pay their bills on time.