Several of the biggest credit card issuers in December posted their lowest rates for chargeoffs than in any other month of 2010, meaning fewer accounts are slipping into default.
Citibank, which has reported some of the highest charge-off rates over the past two years, posted the biggest decline - writing off 8.34% of its card balances in December, down from 9.4% in November and well below the high of 11.55% posted in March. Discover, Chase and Capital One also reported substantial declines in their card charge-off rates.
The charge-off rate, industry-wide, peaked in the second quarter of last year at 10.37% of balances, according to the latest data from the Federal Reserve. In the two years before the recession, it averaged 3.82%, Fed records show.
Credit card debt has been dropping the last two years, reflecting several factors including individuals paying down balances and credit card companies cutting the amount of available credit and writing off what they cannot collect, Moody's Investor Service and Fitch Ratings both tell Collections & Credit Risk.
The elimination of many card users who could not pay their bills is a key reason for the lower charge-off rates. TransUnion estimates as many as 8 million former credit card users no longer have cards, either by choice or because their banks cut their credit lines.
Card companies have tightened lending standards, so people who lost access to credit during the recession have not been able to get new cards. Fed data shows that in November, total revolving debt held by U.S. consumers - which is mostly credit cards - fell to $796.5 billion,
