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Late payments on cards have dropped to levels seen prior to recession

2011-06-30

Now there has been a steady drop in late payments. The rates have dropped to the same levels that were seen prior to recession. Even the defaults have come really close to the standard levels, as per the reports from six of the top issuers in the nation.

The payment rates for the month of May showed that there was a dip in the late payments where levels had reached the pre-recession levels. This was evident from a set of regulatory filings recently.

American Express which is one of the leading issuers has stated that the late payments that were more than 30 days overdue is far better now than what it was prior to the economic downturn. It is at 1.6% on the balances for the month of May.

JP Morgan Chase reported 2.66% and this was last seen during mid-2006. Even Discover Financial Services had posted 2.88% and it is the best rate since the last four years.

These late payments are otherwise known as delinquencies and this is an indicator of the future financial health of the industry.

After a period of 180 days, banks typically write off these balances on credit card balances as uncollectible.

In the month of May, AmEx had the lowest default rates. It was at 3.2% of balances annualized. Capital One and Discover were also next in line at around 4.84% and 4.82% respectively.

Michael R. Dean, MD at Fitch Ratings stated that he expected delinquencies to drop further.