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Bank of America states that January's payments were the best since two years

Tuesday, March 01, 2011

According to Bank of America, customers had shown the best payment habits in the month of January for the last couple of years. In a regulatory filing on Tuesday, the bank stated that the rate at which it had written off credit card debts as uncollectable had fallen from 9.31% to 9.2% in the month of January. The default rates were as low as this only in February 2009.

In general, card companies write off loans as uncollectible after a lapse of 180 days past the due date, a point where they assume that they will not be able to collect the balances. The charge-off rates at Bank of America were the highest at 14.53% annualized during August 2009.

Prior to the recession, charge-off rates averaged at 3.82%, but during the second quarter of 2010, the charge-offs had peaked to 10.37% on balances in the financial sector.

Even the late payments, the ones that were 30 days past the due date, had fallen from 5.24% during December to 5.17%. All these figures are a good sign as these are indicators of future defaults.

The results posted by the bank have echoed improvements in the financial situation, and it remains the same with other major card issuers as well.

Consumers went back to use their cards during the holiday season, and that seems to be the cause for these improvements. Things seem to be looking up after a two-year decline.