Fitch: Credit card charge-offs on the decline

09.01.09
By Timothy Jones

It appears that Americans might be getting a better handle on paying down their credit card debt as a new report finds that credit card charge-offs fell in July after months of continual increases.

The report from Fitch finds that the charge-off rate - the percentage of credit card balances companies expect to never collect - fell to 10.55 percent in July, a 24 percent basis point drop from June.

While this may be a sign that consumers' finances are improving, there still is a way to go before default rates return to levels seen before the economic downturn. According to Fitch, charge-offs have risen 45 percent between February and July and now stand 63 percent higher than they were one year ago.

Michael Dean, managing director at Fitch, says a number of economic indicators need to improve before there is any consistent drop in defaults.

"We still need to see some measurable improvement in the delinquency and personal bankruptcy figures and the employment situation overall before charge-offs revert to more historical norms," he said. "For now, we expect charge-offs to moderate at these elevated levels in the coming months."

A decline in defaults and delinquencies appears to be a trend which may be a good sign for consumers. Last month the Moody's Credit Card Index found that the default rate had fallen from an all-time high of 10.76 percent in June to 10.52 percent in July. This was the first decline in the charge-off rate since last September.

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Americans appear to be getting better at paying their credit cards