NEW YORK (12/6/11)--Credit card charge-offs in the U.S. in October fell six basis points to 5.21% from 5.27% in September and 8.79% in October 2010, according to Moody's Credit Card Indices.
October's charge-offs were at their lowest level since 2007. Moody's said it expects charge-offs to continue to decline well into next year and push the rate to below 4% by year-end 2012.
"Following the sizeable, 75-basis point decline in the charge-off rate in September, driven in part by seasonal trends, the continued improvement in October is notable," said Jeffrey Hibbs, assistant vice president at Moody's. "Earlier in the decade, sharp charge-off improvements in September were typically followed by increases in October, a pattern that has been broken now for the past three years," he added.
The charge-off rate measures credit card account balances written off as uncollectible as an annualized percentage of total outstanding principal balance, said Moody's Investor Service in a release late last month.
The delinquency rate--which measures the portion of account balances that a monthly payment is more than 30 days late as a percent of total outstanding principal balance--continued to hold steady at an all-time low of 3.04%, said Moody's. Early stage delinquencies were one point lower at 0.86%, near where they have hovered the past seven months.
That means the pace of further improvement likely will be muted, said Hibb, who noted, "the calendar is moving into a period that suggests seasonal declines in the early-stage delinquency rate in the coming months."
The payment rate, a measure of the average amount of principal that cardholders repay each month as a percentage of total outstanding principal balance, slipped below 21% for the first time since April. The October payment rate was 20.91%, or one percentage point below the all-time high reached in August.
"Historically, low delinquencies and high payment rates reflect the improved borrower mix in credit card trusts today as weak borrowers have charged off at record levels in the recent recession and originators have added few new accounts to the securitizations," Hibbs said.
In credit unions, loan delinquency also continued its year-long decline, with the rate in October at 1.57%. That is a decrease from 1.59% in September and 1.76% in October 2010, according to the Credit Union National Association's Monthly Credit Union Estimates for October, which was released Monday.