Charge-offs on asset-backed U.S. private-label retail credit cards rose sharply in December, heading back toward record highs set last summer, while retail card delinquency rates abated slightly, Fitch Group’s Fitch Ratings notes in a report released Jan. 14.
The charge-off rate on outstanding receivables for retail credit cards at the end of December was 12.56%, up 122 basis points from 11.34% the previous month, according to the Fitch Retail Credit Card Index. Charge-offs on retail credit cards peaked in August at 12.81%, Fitch says. The delinquency rate in December on retail credit cards at least 60 days past due was 5.22%, down 15 basis points from 5.07% in November.
Fitch forecasts continued “elevated” charge-offs and delinquencies in retail cards through the first half of 2010, in line with anticipated higher-than-average unemployment levels and lower consumer confidence.
“Households will remain cautious with their spending and further curtail their use of retail cards in 2010,” Michael Dean, Fitch managing director, said in a statement.
But the recent softening of retail cards’ delinquency rates is a positive sign. “While results were negative throughout (2009), we have seen the pace of deterioration moderate more recently,” Dean said, noting card issuers have “tightened underwriting standards and become more selective” when adding accounts to their portfolios, which he says should help mitigate loss rates.
Fitch’s Retail Credit Card Index tracks $65 billion in retail credit card receivables from lenders, including Citigroup Inc., GE Money Bank, HSBC and World Financial Network Bank whose portfolios include consumer credit card programs for retailers Walmart Inc., Sears Holdings Inc., Home Depot Inc., J.C. Penney Co. Inc. and Best Buy Co. Inc.
