NEW YORK - The quality of American credit card borrowings continued to improve through the third quarter, according to Moody's Investors Service Inc.
Adding weight to previous statistical indications of improved consumer credit quality, the Moody's index of card chargeoffs fell dramatically in September.
The delinquency rate rose slightly during the month, but the longer-term trend is still decidedly down.
Moody's bases its indexes on the performance of securitized pools of credit card receivables.
Chargeoff Rate Declining
The chargeoff rate, defined as the percentage of credit card account balances written off as uncollectible, declined to 4.65% in September, its lowest level in almost three years.
Chargeoffs stood at 4.88% in August, 5.25% at the end of the second quarter, 5.66% in December 1992, and 5.59% in September 1992.
Average chargeoffs for the third quarter, at 4.80%, were nearly 15% better than the 5.62% registered in the 1992 period.
Less-Valued Indicators
The delinquency rate - the percentage of card account balances on which a payment is more than 30 days late - was 5.27% in September 1993.
This was three basis points higher than in August but two basis points lower than in June.
Moody's views month-to-month swings as less-valid trend indicators than comparisons with the year-earlier month, in this case the much higher 5.77% in September 1992.
But a short-term flattening in the delinquency trend was also apparent in the American Bankers Association's delinquency indicator for the third quarter, reported last Thursday.
Expressed as a percentage of credit card accounts at least 30 days past due, the ABA figure stood at 2.66% at the end of the third quarter, up from 2.63% in June, while delinquencies on most other types of consumer credit were significantly down during the quarter.
Expects a Stabilization
Moody's also pointed out that in the most recent quarter, the average delinquency rate was 5.26%, compared with 5.75% in the third quarter of 1992.
"The improving credit performance of securitized pools of credit card receivables results from the current economic recovery in the United States," the Moody's report said.
"As the expansion continues, aggregate chargeoffs and delinquencies should continue to decline moderately and, eventually, stabilize."
Edward Bankole, the Moody's analyst who compiles the indexes, said he expects chargeoffs and deliquencies will stabilize eventually at levels somewhat higher than those of the late 1980s.
The Moody's chargeoff rate hit a low of 3.02% in November 1989, delinquencies 3.98% in May 1989.
Weaker Credit Quality Cited
The reason the improvement is likely to be limited, Mr. Bankole said, is "the comparatively weaker average credit quality of today's credit card holders."
"That weakness results from the increasingly tight competition among credit card issuers, which has led to a broadened pool of credit card holders and higher average credit lines, as well as the increasing willingness of consumers to file for personal bankruptcy," Mr. Bankole continued.
Moody's indexes are derived from performance data for 70 of the more than 100 credit card-backed securities rated by Moody's. The index sample includes approximately $62 billion of bank credit card receivables.
