CreditCardsAct

According to the most recent release from Moody’s Investors Service, the worst is over for credit card companies and cardholders. The current trend shows that card losses continue to decline. Being labeled a trend is important because the data must be rising or falling greater than the typical average over a specified period of time. In the case of card delinquencies and defaults most experts would require three months. Moody’s Credit Card Index indicates that 10.71 percent of securitized credit card loans were written off as uncollectable in May. Securitized loans are those accounts with credit balances that are pooled and repackaged for investors. Defaults were 10.62 percent which was up slightly from the same period last year, however, down from 10.91 percent in April.

For the first time in three and a half years, Moody expects credit card write-offs to begin showing a year-over-year improvement. Meanwhile, Moody reports that credit card delinquencies between 30 and 69 days declined again for the 7th consecutive month. Moody notes that this is important because these card delinquencies predict future write-offs. Cardholders are doing a better job of paying down credit balances the company reports. Repayment rates increased to 18.59 percent which was more than 10 percent higher than a year ago. According to Moody, unemployment should reach a plateau of 10.1 percent sometime during the second half of the year. This along with the fact that the delinquency rate is trending down and the repayment rate has increased, Moody’s believes that card defaults have peaked.

Despite the positive news from the Moody index, banks remain pessimistic over the stability of the credit card market. Recent card reform is expected to make card issuers turn their focus more on growing the consumer banking part of the business. However, new financial reform legislation that calls for a consumer finance protection agency, is expected to be approved within the next few days. If passed, this agency will be overseeing the consumer banking industry as well.

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