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Credit card charge-off rates on outstanding receivables reached record levels in April and are likely to continue climbing, according to a number of indices.
Moody's Investors Service this week announced that charge-off rates on prime credit card account receivables hit a new high last month, while delinquency rates softened slightly. Moody's Credit Card Index reached 9.97% last month, which the ratings agency said is consistent with its expectation that charge-off rates will peak in the second quarter of 2010 at about 12%. The delinquency rate for credit card accounts 30 days or more past due declined to 6.34%, down six basis points from 6.4% in March. Moody's attributed the decline to the seasonal effect of consumers receiving income-tax refunds.
Earlier this month, Fitch Ratings Inc. reported that its own index tracking the average charge-off rate on prime credit card receivables rose to 8.89% in April, its highest point to date. The delinquency rate for credit card accounts at least 60 days past due in April was 4.44%, a new peak, Fitch said. But it was the smallest increase in the average credit card delinquency rate in five months, perhaps because of a seasonal trend or "evidence of a nascent trend toward deceleration" of delinquencies, Fitch noted.
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