Moody's sees better credit card performance in August

By Jeremy M. Simon

Moody's Investors Service reported that credit performance measures tracking about $400 billion of U.S. credit card receivables showed ongoing improvement in August for the eighth straight month.  All five performance metrics followed by Moody's Credit Card Indices improved from year-ago levels.

The charge-off rate, which measures the credit card account balances written off as uncollectible as an annualized percent of total loans outstanding, dropped to 4.07 percent in August from 5.53 percent last year.  The charge-off rate started 2006 at close to an all-time low and had risen steadily throughout the year.

Quarterly personal bankruptcy filings for 2006, through the second quarter, are at the lowest levels in more than a decade.  Additionally, Moody's stated that write-offs due to bankruptcy, which generally are a major component of the total loss rate, have fallen off dramatically amid the ongoing effects of the bankruptcy reform legislation enacted in late 2005.

The delinquency rate slid to 3.59 percent in August from 3.98 percent one year prior.  A measure of the proportion of account balances for which a monthly payment is over 30 days late as a percent of total balances, the delinquency rate has improved for the last 37 months in a row.

In August, consumers repaid, on average, 20.17 percent of their credit card debt, versus the 18.69 percent paid back the year before.  For the last 39 months, the payment rate has exceeded its year-ago levels.     

Published: November 2, 2006

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