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Delinquencies and consumer spending on credit cards decrease

2010-12-29

Most of the major credit card lenders in the United States reported a decrease in delinquencies in November. The fact that many card holders are making their payments on time seems to herald the end of financial crisis that rocked the world over the last few years.

A majority of the customers are also avoiding using their credit cards for holiday shopping signaling they are not ready to add to their current debts. This may cost the credit card lenders a significant amount in terms of revenue since the debts are bound to come down.

Some of the major credit card issuing companies in the United States, including Citigroup, JP Morgan Chase and Bank of America revealed that the delinquencies hit an all time low in November. Though initially financial analysts attributed the decrease in delinquencies to tax returns, there is no apprehension on this front anymore since the trend seems to be consistent.

Delinquencies generally signal impending financial crisis since customers are not able to make their payments on time. It generally implies that in the near future, the loan may have to be written off. However, with the delinquencies showing a dip, the lenders are smiling as the number of write-offs is decreasing in number.

Though Capital One and JP Morgan Chase did report the fact that the rate of charge offs slightly increased, the numbers were definitely less than what they saw at the beginning of this year.

The loans and debts tend to increase with customers spending relentlessly during the holiday season. However, this does not seem to be the trend this year since only a meager 16.9% of the consumers who shopped on Black Friday used their credit cards to make payments and this has also been the case for consumers making Christmas purchases.