March has proved to be a tricky month in recent years for consumers to keep on top of their credit card payments after holiday shopping trips. This year, delinquency and default rates in March dropped, and the balances that credit card issuers had to charge off as uncollectible declined.
Assuring Lows in Credit Card Industry
The top credit card companies — Chase, Bank of America, Discover, Capital One, Citibank and American Express — reported a drop in delinquency and charge-off rates in March. In fact, both rates are the lowest they’ve been since mid-2008.
Capital One and Discover boasted the greatest improvements in delinquency rates and credit card defaults this month, according to The Associated Press. Bank of America reported the highest delinquency rate at 4.82% of balances, while American Express reported the lowest delinquency rate at 1.8% of balances.
According to the Federal Reserve, overall charge-off rates dropped in the fourth quarter of 2010 to 7.7% of balances from a high of 10.9% in the second quarter of that year. Bank of America and Discover reported the greatest improvements in their charge-off rates. Bank of America’s charge-off rate was still the highest among top credit card issuers at 8.18%, while American Express had the lowest rate at 3.7%.
According to Moody’s Investors Service, it is likely we will see this trend continue in the coming months. The drop in delinquency rates is a particularly good sign, a Moody’s analyst told The AP.
Consumers Improve Delinquency Rates
The post-holiday months can be a challenging time for consumers, yet they seem to have a stronger foothold in the management of their bills as the economy gradually recovers. The increase in employment rates certainly helps consumers to better manage their finances, but many of us have also learned to be smarter, more cost-efficient shoppers in the face of economic challenges. Both these factors might contribute to the drop in delinquent payments, which is defined as a payment that is at least 30 days late.