April credit card data shows fewer late payments

NEW YORK — More consumers paid their credit card bills on time in April, in another sign the fledging economic recovery may be picking up some steam.

Capital One, Discover, American Express, Chase and Citibank all said the rate at which they wrote off unpaid credit card bills fell last month. Several lenders saw improvement for the second straight month.

American Express had the lowest rate at 6.7 percent of its total loans, down from 7.5 percent in March. American Express customers tend to be more affluent than those of some of the other lenders.

Of the top six U.S. credit card issuers, only Bank of America posted higher charge-offs for April — 12.71 percent versus 12.54 percent in March. Citi took the No. 2 highest spot at 11.23 percent of total balances, though that improved from 11.55 percent in March.

Banks write off unpaid balances when customers are 180 days or more past due on their bills, assuming at that point the balances are uncollectable.


The banks also reported good news for late payments.

Every one of the top six issuers said the number of bills 30 days or more past due declined in April. Bank of America had the highest late payment rate at 6.73 percent of its total credit card loans, but that was still less than the 7.07 percent a month earlier. American Express had the lowest delinquency rate at 3.1 percent, down from 3.3 percent in March.

The improving economy is one of the major reasons for the declines, said Scott Hoyt, senior director of consumer economics at Moody's

"We're finally adding jobs," Hoyt said. "And that's certainly a much better environment for credit card issuers than when we were bleeding jobs."

Hoyt also noted that banks spent much of 2008 and 2009 tightening lending standards and cutting back on credit limits. Less available credit would naturally lead to improved charge-off rates, as bad accounts were cleaned out of the system, he said.

The individual bank numbers followed the release of broader first-quarter delinquency statistics gathered by credit reporting agency TransUnion.

After examining about 10 percent of its database of consumer credit reports, or 27 million files, TransUnion found the rate of borrowers who fell 90 days or more behind on their card payments dropped to 1.11 percent for the three months ended March 31.

That was down from 1.32 percent in the 2009 first quarter, and 1.21 percent in the final quarter of 2009, TransUnion said. The rate hovered between .50 and .75 percent before the recession.


TransUnion uses a 90-day late payment measure because it considers that a good indicator of potential default.

While not discounting the economic recovery and reduced available credit, TransUnion suggested that credit card reform also likely played a role in improving payment rates.

The major provisions of the legislation took effect in February. The law limits banks' ability to raise interest rates and minimum payment thresholds, along with cutting back on allowable fees.

Those elements combined to keep required minimum payments, and therefore delinquencies, lower, said Ezra Becker, director of consulting and strategy in TransUnion's financial services unit.

"Minimum payment due is an important factor when looking at delinquency," Becker said. "When you ask for more of a payment, you will actually push some people who are on the fringe into delinquency."

What To Read Next
Get Local