Reflecting the effects of lenders’ tight management of credit card standards over the past couple of years, the average U.S. consumer credit card charge-off rate declined again in May as it continues its march to potentially record low levels, according to new data Moody’s Investors Service released June 21.
The average credit card charge-off rate reached 6.95% in May, down 21 basis points from 7.16% in April, Moody’s said in its monthly credit-quality report.
The charge-off rate was last in similar territory during the fall of 2008, when the recession was beginning to take hold, Moody’s data show. The average charge-off rate was 6.75% in October 2008, and the following month it rose to above 7% and continued to climb, peaking at 11.08% in February 2010.
The average delinquency rate on credit cards during May was 3.3%, down 23 basis points from 3.53% in April. The early-stage delinquency rate for accounts at least 30 days past due also declined by 4 basis points, to 0.84% from 0.88%, setting an all-time low, Moody’s said.
“The early-stage delinquency rate has historically been a reliable indicator of charge-off rate trends for the next several months, and the ongoing lows in these delinquencies provide clear support for our near-term view that the charge-off rate is poised for further declines at least throughout the rest of the summer,” Moody’s said in its monthly credit-quality report.
Moody’s earlier this year predicted the average charge-off rate would fall below 7% during the second quarter, and the firm also has said it expects the charge-off rate to fall as low as 4% by 2012 (
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