Credit card charge-offs remained virtually flat in February, while delinquency rates fell for the fourth consecutive month, suggesting charge-offs may be nearing their “ultimate” peak after generally climbing for more than a year, Moody’s Investors Service said in a report this week.
The charge-off rate on U.S. outstanding receivables was 11.08%, up one basis point from 11.07% in January, which Moody’s said corroborates other signs of improving performance in securitized credit cards. Charge-off rates peaked at 11.5% in August.
If present trends continue, the credit card charge-off rate may reach its ultimate peak this month or next, Moody’s said. That peak may be “at or close to a peak rate that would be slightly lower than Moody’s long-held forecast of 12%,” the firm said.
The delinquency rate for credit card accounts more than 30 days past due fell for the fourth consecutive month to 5.91% in February, reaching its lowest level since August. A steady improvement in delinquency rates often is a harbinger of improving charge-off rates, Moody’s said. The firm expects delinquency rates to remain lower through the spring, partly because of seasonal patterns that include consumers receiving tax refunds.
If the economy takes a turn for the worse, charge-off rates likely would rise again, Moody’s warned, suggesting the economy stands a one-in-four chance of sliding back into recession this year.
