The industry-wide rate of charge offs – accounts 90 days or more behind and deemed irretrievable by lenders – rose overall for all major U.S. credit card issuers in February, according to the latest monthly statistics from Moody’s Investors Service. However, the increase, to 7.56 percent from the 7.45 percent observed in January, was not unexpected.
[Consumer Resource: Understanding Your Debt Collection Rights]
The nationwide rate of delinquency, often seen as an early predictor of future charge offs, increased in September, the report said. As a result, this indicated that defaulted accounts would come sometime in the next four to six months. However, Moody’s also noted that the increase in charge offs is not expected to continue for long, and could dip below 7 percent at some point in the second quarter of this year.
Meanwhile, delinquency was a bit of a mixed bag in February, the report said. The rate at which accounts were 30 days or more behind on payments slipped for the 16th straight month, to 4.02 percent from 4.1 percent. That was the lowest level observed since August 2007. However, “early-stage” delinquency – accounts 59 days or more behind – rose slightly to 1.02 percent from 1.01 percent in January.
Charge offs have slipped appreciably in the last year as many consumers have become more conscious of their debt obligations, but a large amount can also be attributed to former borrowers who have been locked out of the borrowing system altogether.