Consumers Fell Behind on Credit Card Payments in November

Borrowers’ credit card habits have changed drastically since the end of the recession, but as they’ve started carrying slightly more debt in recent months, default rates for some of the nation’s top lenders crept upwards in November.

Capital One Financial, Discover Financial Services and American Express all saw higher rates of charged off credit card accounts last month as borrowers fell so far behind on payments that their balances could no longer be considered collectable, according to a report from Dow Jones Newswires. Of those three companies, Capital One saw the largest gain in charged off accounts, which surged to 4.46 percent of all outstanding balances from 4.25 percent.

Meanwhile, both Discover and American Express saw increases of just one basis point in November, the report said. Charge-offs rose to 2 percent from 1.9 percent at the latter, and 2.2 percent from 2.1 percent at the former. Typically, these two companies have the lowest rates of delinquency and default in the lending industry, at least among its largest participants.

Both those companies also saw early-stage delinquencies – accounts 30 days or more behind on payments – slip during the month, while Capital One’s rose to 3.71 percent from 3.66 percent, the report said. The lender attributes these shifts to its acquisition of HSBC’s portfolio earlier this year; that collection of cards is based mainly on retailer-issued accounts with less stringent qualification standards, and therefore higher rates of delinquency and default.

“The portfolios at this point are pretty seasoned,” Sameer Gokhale, an analyst with Janney Montgomery Scott who covers credit card lenders, told the newspaper. “Whatever you have in your credit card portfolio is going to reflect a customer base that’s generally stabilized.”

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Historically, late payments tend to increase around the end of the year and even into the start of the new year, as consumers use their credit cards to finance holiday gift purchases and then struggle to pay back the added debt.

Image: Steve A Johnson, via Flickr