Credit card chargeoffs fell in June, another sign card losses are easing after soaring as the U.S. recession took hold, reports Moody's Investors Service.
Charge-offs on credit cards ended last month at 10.28%, or 43 basis points below the May level, according to Moody's Credit Card Indices. A basis point is one-hundredth of a percentage point.
Credit card charge-offs also dropped in June from the same month last year, when they were 10.76% -- the first annual drop since December 2006. The charge-off rate measures credit card account balances that are deemed uncollectable and written off, and calculates them as an annualized percentage of total outstanding principal balance.
Moody's believes chargeoffs have peaked and expects they will gradually decline in the last two quarters of this year. The best-case outlook anticipates the unemployment rate will plateau at 10% in the second half of the year.
The delinquency rate of credit cards fell in June for the eighth consecutive month to 5.08%, the lowest monthly rate since November 2008.
The delinquency rate on loans 30 to 59 days past due, meanwhile, fell a single basis point in June to 1.25%. Still, Moody's expects that so-called early stage delinquency rate to begin rising this month and into the fall.
"Overall, compared to a year ago, delinquency trends are clearly improving across the industry and are consistent with our expectation for lower charge-off rates in the months ahead," said Moody's analyst Jeffrey Hibbs.
The yield index, or annualized percentage of income collected as a percent of total credit card loans, also improved in June. It rose 13 basis points to 23.02%.
Moody's Credit Card Indices measure the performance of the pools of credit card receivables, or outstanding balances, that back all publicly rated securities for at least one year.
