U.S. credit card defaults fell in September to a two-and-a-half-year low, continuing a downward trend as the economy heals, according to Fitch Ratings.
Fitch's prime credit card chargeoff index fell below the 10% mark, to 9.22%, from 10.36% a month earlier.
For the third quarter ended September 30, credit card loss metrics fell industrywide despite stagnation in the unemployment rate, according to Fitch.
As long as improvement continues "in the employment situation, particularly on the new jobless claims front, we could foresee further improvements" in chargeoffs, Fitch managing director Michael Dean said. He said defaults still remain high on a historical basis.
Over the near-term, Fitch believes credit trends will be more highly correlated with short-term unemployment indicators, such as unemployment insurance claims, which have trended down in recent quarters.
A host of data have indicated that delinquencies on credit cards and other debt have been on the decline this year as the U.S. has exited the recession and the economy has improved somewhat.
An overall imrovement in issuer credit card loss metrics has been driven by tighter underwriting, positive trends in delinquency rates and a substantial cleansing of issuer portfolios.
Third quarter delinquencies of 30 days or more improved across the board for the largest industry players and, in some cases, beat 2005-2009 portfolio averages. For example, American Express' delinquency rate of 2.5% at quarter-end was well below its 2005-2009 average of 3.14%.
