Moody's Investors Service said the credit card yield of securitized receivables fell to a record low in January because of intensified competition and bad weather, but found credit quality continued to improve.
The portfolio yield, which Moody's defines as cash income received -- annualized as a percentage of outstanding principal balances -- in the securitized pools of credit card receivables, fell to 18.45%, compared to 19.95% in January 1993.
Industry competition continues to put downward pressure on yield, as January's results marked the 14th consecutive month in which the yield dipped from year-earlier level, Moody's reported. Weather-related delays in payment collections may have played a role in the decline in the yield index, Moody's said.
Credit Quality Up Again
The credit quality of securitized credit card receivables, measured by delinquency and chargeoff rates, improved for the 17th straight month.
"As the economic recovery continues, we expect the aggregate chargeoff and delinquency rates to either stabilize or continue to decline moderately," said Edward Bankole, the Moody's analyst responsible for maintaining the indexes.
"However," he said, "we do not expect them to fall to levels below those of the late 1980s -- because of increasingly tight competition among card issuers and an increased willingness of consumers to file for personal bankruptcy" factors that have weakened the credit quality of the average cardholder.
The chargeoff rate -- balances written off as uncollectible, as an annualized percentage of outstanding balances -- was 4.67% in January, compared to 5.37% a year earlier.
The delinquency rate -- balances in which a monthly payment was more than 30 days late -- also annualized, was 5.47%, down from 5.78%.
Principal Payments Rise
In January, consumers made principal payments at a rate of 12.94%, up from 12.30% a year earlier but down slightly from the 13.75% in December.
Moody's card indexes are based on credit performance data for 67 of the 100 individual credit-card backed securities rated by the company. The sample includes about $69 billion of bank credit card receivables.