Credit card payments improve in July, major issuers see lower default, late payment rates

Consumers card payment rates up again in July

DES MOINES, Iowa — Consumers keep improving how they manage their credit card payments, with fewer customers in July defaulting or making late payments compared with the previous month, according to regulatory reports the lenders filed Monday.

On-time payments have been rising the last several months for many major card issuers.

As long as unemployment rates remain high, consumers are expected to continue to face financial difficulties, but the figures show continued improvement in Americans’ ability to pay down their credit cards, said Fitch Ratings analyst Mike Dean.

“Some of that is seasonal, but this has been an extended period that we have seen those delinquency improvements and they will translate over time to improvements in charge-offs, which are now starting to fall,” he said.

Charge-off rates — the share of outstanding balances that the companies have given up recovering — fell in July for Discover Financial Services, Capital One Financial Corp., JPMorgan Chase & Co., Bank of America Corp. and American Express Co.

Card companies typically write off loans after they’re 180 days past due, the point at which they assume they won’t collect a balance.

The industry has written off a record amount of loans in the past year.

For the first three months of this year, the industry charged off just short of 10 percent of balances. That compares with 3.8 percent in the second quarter of 2007, before the recession began.

Capital One’s charge-off rate improved the most in July, while delinquency rates fell for the seventh straight month at both Discover and Chase.

Here are details:

— CAPITAL ONE: U.S. card charge-offs fell to 8.1 percent of total balances in July from 9.3 percent in June. The company said 4.66 percent of its loans were 30 days or more past due in July, down from 4.79 percent in June and 4.8 percent in May.

For Capital One’s international cards, the charge-off rate was 7.86 percent in July, compared with 8.3 percent in June. Capital One’s international delinquency rate also eased — to 5.94 percent in July from 6.03 percent in June. The charge-off rate in Capital One’s auto loan unit fell to 2.6 percent in July from 2.72 percent in June, and the auto loan delinquency rate fell to 7.72 percent from 7.74 percent.

— DISCOVER: Discover Financial Services said its net charge-offs declined to 7.28 percent in July, from 8 percent in June. Its rate of loans 30 days or more past due slipped to 4.7 percent in July from 4.8 percent in June.

— CHASE: Chase said its net credit losses fell to 7.88 percent of total balances in July, from 8.32 in June. Chase said its rate of loans 30 days or more past due slipped to 4.25 percent in July from 4.3 percent in June.

— BANK OF AMERICA: Bank of America said the share of credit card balances it wrote off as uncollectable fell for the fourth straight month and past-due payments dropped to their lowest point of the year. It said its charge-off rate dropped to 11.39 percent of balances from 11.98 in June.

Bank of America is the among the top three U.S. banks offering credit cards, with about 80 million cards in circulation, according to the Nilson Report, an industry newsletter.

Bank of America said the rate of late payments has fallen to its lowest point of the year, 5.92 percent from 6.16 percent in June. That’s a sign that the debt burdens felt by card holders over the past two years is beginning to ease.

— AMERICAN EXPRESS: American Express said its charge-off rate fell to 5.5 percent in July from 5.7 percent the month before and the delinquent card payments 30 days past due slipped to 2.6 percent from 2.7 percent in June.

— ALLIANCE DATA SYSTEMS CORP.: This manager of credit card programs for more than 90 retailers, including Victoria’s Secret, Ann Taylor and Pottery Barn, said its net charge-offs fell to $35.4 million, or 8.6 percent of total balances from $36.7 million, or 8.8 percent in June.

Delinquencies among its company-branded credit cards rose to $271.4 million, or 5.7 percent, as of July 31. On the same date a year ago, $251.6 million, or 6 percent, of balances on the cards was delinquent. The Dallas-based company said the increase is consistent with its historical seasonal rise in late payments.

—CITIBANK: The nation’s No. 2 card issuer said its credit losses fell to 9.10 percent of balances, down from 10.72 percent in June, which is a restated figure.

Citibank’s charge-off rate had been increasing through March when it peaked at above 11 percent.

The New York-based bank, a division of Citigroup Inc., also said fewer customers were falling behind. For July, payments past due by 30 days or more reached 8.32 percent, down from 8.58 percent in June.

Shares of Capital One, Chase and Discover rose less than 1 percent Monday.

American Express was unchanged in early afternoon trading.

Bank of America, Citigroup and Alliance Data shares slipped less than 1 percent.