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The U.S. credit card charge-off rate dropped to 10.52% of annualized prime credit card receivables in July following a record-setting high of 10.76% in the previous month, according to Moody's Credit Card Index.
Last month's rate is up 416 basis points from 6.36% for the same period last year. However, July's charge-off rate marks the first decrease since September. A basis point is one-hundredth of a percentage point.
Moody's says it still expects charge-offs to peak as high as 13% sometime in the middle of next year to coincide with an anticipated crest in the unemployment rate of approximately 10.5%. However, "further and persistent improvement in delinquency and charge-off rates in the months to come may challenge our macro-driven charge-off rate forecast," William Black, Moody's senior vice president, said of the report's findings.
The delinquency rate for prime credit card accounts at least 30 days past due declined to 5.73%, its lowest level of 2009. The July rate is up 121 basis points from 4.52% during the same period last year.
"July tends to mark an inflection point with respect to seasonal trends," Black said. "As we move into the second half of the year, we expect delinquencies will again rise as back-to-school and holiday expenditures compete with credit card payments."
