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The U.S. credit card charge-off rate fell below 11% in September after setting a record high in August, according to Moody's Credit Card Index.
The September charge-off rate decreased to 10.72% of annualized prime credit card receivables from 11.49% a month earlier. Last month's rate, however, is up 409 basis points from 6.63% a year ago.
"The current retreat in charge-offs reflects, at least in part, an earlier seasonal decline in delinquencies," Will Black, Moody's senior vice president, said of the report's results.
Despite the month-to-month decrease, Moody's still expects charge-offs to peak in mid-2010 at 12% to 13% – a result of rising delinquencies and expected increases in the unemployment rate.
The delinquency rate for cards at least 30 days past due increased 119 basis points, to 5.97% of outstanding receivables from 4.78% a year earlier. Last month's rate is 17 basis points higher than 5.8% reported in August.
"The increase we saw in the delinquency rate shows the industry has entered a seasonal period of generally higher delinquencies," Black said. "Even though the total delinquency rate had improved throughout the summer, it still remains a full percentage point higher than year-ago levels."
The payment rate in September fell to 16.76% from 16.9 the prior month. The payment rate measures the average amount of principal that cardholders repay each month, measured as a percentage of total outstanding principal balance.
The decline was in line with Moody's expectations for weakening industry-wide payment rates into 2010. Moody's expects the void of home-equity withdrawal and lower purchase volumes among convenience users – those cardholders who pay their balance in full each month – to continue to drive payment rates to lower levels.
