U.S. Credit Card Performance Deteriorates - Again

Credit card performance deteriorated further in two important metrics in March, but not by enough for any immediate rating implications for credit card asset-backed securities, according to Moody’s.

The charge-off rate is now the highest it has been since December 2005, when charge-offs temporarily spiked due to a change in the consumer bankruptcy law, Moody’s said. “The normalization of bankruptcy filings and economic headwinds will most certainly continue to increase charge-off rates throughout the year and, perhaps, into 2009.The charge-off rate measures those credit card account balances written off as uncollectible as an annualized percent of total loans outstanding. The rise in February marks the fourteenth consecutive month of year-over-year increase and the fifth consecutive month of month-over-month increase.”

At 5.59%, the February charge-off rate is just above the long-term average of about 5.5%, Moody’s said. After the 2001 recession, charge-off rates eventually reached 7.05% in May 2003, according to figures tracked by Moody’s Credit Card Index. As in the 2001 recession, the rising trend in charge-off rates following the 1991 recession significantly lagged (by more than a year) the official periods of business cycle contraction.

Moody’s “believes that fundamental differences in credit underwriting standards, risk management, issuer credit strength, and macroeconomic drivers explain why the credit card sector does not appear to be following the downturn in the sub-prime mortgage sector at this time.”

The delinquency rate, which can be an early indicator of future charge-off rates, is also on the rise. In February, this rate was 4.53%, the highest it has been since March 2004.

Interestingly, though, the early-stage delinquency rate (i.e. card balances less than 30 days past due) has been relatively stable for the past six months; however, the late-stage delinquency rate (i.e. card balances 90 days or more past due) continued to rise, Moody’s said. “This apparent dichotomy between the trends in early- and late-stage delinquencies may be indicative of an ever more challenging collection environment. That is, once cardholders fall behind in their credit card payments, it is increasingly difficult for them to re-obtain “current” status.”

More details and other metrics are available in Moody’s report U.S. Credit Card Performance Mixed in February.

Comments

[Jake Blues:]

There seems to be a disproportionate amount of anti-V articles on this site.

2008 Apr 15 08:09 PM

[chestnutlane:]

This article has nothing to do with VISA or MasterCard although it is relevant for American Express. V and MA neither issue or hold receivables they are pure processors.

2008 Apr 15 10:09 PM

[rtf:]

exactly. all of MA's and V's revenues are transactional. If the article was talking about how the recession was impacting charging patterns and not payment patterns then that would mean something...

2008 Apr 15 11:42 PM

[Adesai:]

This article does NOT seem to make any sence. What does deliquincy rate have to do with MA and V.

2008 Apr 16 08:45 AM

[Adesai:]

I think seekingalpha has some sort of interest in plummetting V stock.. All the articles from seekingalpha seem to be negative.

2008 Apr 16 08:47 AM

[texasgolfer:]

there was a report yesterday to the effect that the termination of unused HELOCs by many banks, actually shifted use to higher interest credit cards.

2008 Apr 16 10:23 AM

[Modest:]

This almost looks like the author is pushing people to buy this report. $550 for this report, or stearing companies to purchase this report.

2008 Apr 16 11:48 AM

[User 109000:]

Anyone that listen's to or acts on blog's released by seeking ALPHA is an idiot and should not be trading stock's....Seeking ALPHA is obviously a hoax and or a shorty trying to cover his, her, or their possition's. Don't look into the light folk's.....Seeking Alpha is being investigated and we'll all know who's going to "jail" real soon.....

2008 Apr 18 05:06 PM

[beachtango:]

What is it with the anti visa articles on this site....????Write in relevence to the correct subject with accurate facts, or don't write at all.

2008 Apr 21 05:35 PM

[beachtango:]

Alpha articles are pure ignorance the majority of the time....

2008 Apr 21 05:36 PM

[Diva:]

They must be Cramer's friends and or he ownes this site to. Well maybe he should see this on his Friend.
The Real Cramer
www.deepcapture.com/ji...
Im Sick And Tired Of Reading Negative Stories On Visa Page .Even where (MA) Mentioned They Do Not Put Stories On The MA Page. Why ? We know Cramer Ownes The Street .com I will not read them ever againn. Is there a Lawyer In The House ? We On The Visa Board Are Working On Suing Cramer .We Need 1000 People .I think that will be easy To Do . He and his Friends Should Be In Jail . What Say You ?

2008 Apr 22 12:10 PM

[User 172125:]

I said I would get back to this site when V hit 75$- and tonight in after-hours it has done just that. I have changed my handle from BuyV- to V Winner- and also proved a valuable point.

To those of you that doubted me and this stock, I have just one word that encapsulates what you are: LOSERS

By the way, there is no 'Sean Miller'- look at 'his' bio- and you will see that this is a pen name- as I have said all along anyone can post an analysis on this site. The problem with that is that you have people with no experience or investment knowledge doing so. My guess is that 'Sean' is actually Joanne (see 'her' earlier post). The reason I say that is that she didn't know that an underwriter can't loan shares to short an IPO for 30 days. She also didn't know that V included all global properties (other than Europe). By demonstrating that she knew very little about investments, and nothing about IPOs- she was probably too embarrassed to use her real name even if that was her name even it 'it' was a her.

Bottom line- I own several thousands of shares as a core position- also trade this stock daily. To date- I have generated a a fortune on this stock. It has been one of the best experiences I have ever had. I am smiling from ear to ear right now looking at the bid price of 75.00 at 6:49pm :)

Yes, V will have some corrections- as all stock does. BUT- this stock went from 58$ to 75$ in a little over a month- and its just starting its run. New institional ownership is less than 5%- and when the float gets soaked up- this stock will break out like a mofo. I expect $100. by the end of summer. The market has finally woken up to the fact the sky is not falling in- and after we broke the 12.900 dow resistance today- we are on the cusp of a run that should take us past 15.000 w/in the next few months.

A few final words:

Wez- You are a loser- I know you can't afford to buy the stock. You probably frequent peep shows too- as I'm sure you can't afford a real woman. Do yourself a favor- open up a virtual stock account and you can pretend you are like those of us that actual invest in V as opposed to spread their negativity.

Buy Foreclosures- You are a loser too- I understand why a bottom feeder (the carp of the financial world)- who makes a living profiting of other's misfortune- can't understand those of us with triple-digit IQs -

Adesai- You are a WINNER buddy- another true believer - congrats.

Jim West- nice talking with you too- good luck !

The best accolades for last:

Green Capitalist- I love you man! I learned about Intrepid Potash from you- I bought it at 48.25 and sold it all the next day- I'm going to give my old benz to my wife and buy a new one on the money I made on that deal alone- thanks bro.

To all of you that actually hold stock in V-good luck- see you at $100.

Jonathan

2008 Apr 24 08:34 PM

[bystander:]

78.56, I seem to remember another ignorant author on this site saying she would short V if she could (When it was at $60), but no shorts were left (of course she didn't realize it couldn't be shorted yet, makes sense from what I have read on seeking alpha.).

Over $100 by year end.

2008 Apr 29 03:18 PM