American consumers shaped up on their credit card payments in February, according to new data from Fitch Ratings Agency, bringing delinquencies to their lowest point on record.
Fitch’s index measuring credit card accounts that were late by 60 or more days fell to 1.61 percent, the lowest since the beginning of the prime index in 1991. In its press release, Fitch says that delinquencies are now 65 percent below their peak in 2009 in the midst of the Great Recession.
Charge-offs – balances that credit card companies write-off because they are so delinquent they don’t expect borrowers to repay them – have also fallen to new lows in February. The Charge-off Index fell to 3.88 percent from 4.18 percent, the lowest level in six years. Compared to the year before, charge-offs are down 26 percent.
The improvement in charge-offs and delinquencies is a sign that U.S. consumers are using their credit cards more cautiously than they did during the run up to the financial crash in 2008. For example, the average charge-off rate since 1991 has been around 6 percent and then hit a high of 11.4 in the beginning of 2010. The fact that they are now in the 3 percent range shows the pendulum has swung back the other way.
Of course, the numbers are also helped by all the risky, lower-credit borrowers who have been cut off from credit since the Recession began as banks tightened their belts. In 2008, there were 500 million credit card accounts but that number has fallen to 380 million accounts today, according to the Federal Reserve.
About Amber Nelson“The credit-card universe is much more high-quality than it has been historically,” says Michael Dean, a Fitch managing director in a U.S. News & World Report article. “Consumers are being much more prudent.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.
0 Comments Received
Leave A Reply