Credit Card Charge Offs, Delinquencies Rose in April: Moody?s

The performance of a giant pool of credit card receivables fared poorly in April as four out of five metrics of the pool turned to the worse, according to Moody’s Credit Card Indices.

The credit card charge off index rose to 6.27 percent in April, its highest rate since December 2005, when changes in federal bankruptcy laws caused rates to spike, Moody’s reported. The April rate was 31 percent higher than that of April 2006. It is the seventh consecutive month of rising charge offs. The rating agency predicted that the card charge off rate could rise to over 7 percent, a rate last seen in the recessions of 1991 and 2001.

The delinquency rate rose to 4.50 percent from 3.70 percent a year ago. Moody’s noted that the early stage delinquency rate – card balances 30 days to 60 days past due – has been stable in the last few months. Meanwhile, late stage delinquencies – those 90 days or more past due – have been rising. 

“This apparent dichotomy between the trends … may be indicative of an ever more challenging collection environment,” Moody’s Structured Finance Group reported. “Once cardholders fall behind in their credit card payments, it is increasingly difficult for them to become current on their payments again.”

Cardholders attempting to get even have been hit hard by the rising costs of gas and consumables. And fewer consumers have access to cash from a mortgage refinancing, Moody’s reported.

Also falling in April was the payment rate, down to 17.49 percent, a decline of more than 6 percent from April a year ago. The yield on the card receivables fell to 18.14 percent from 18.64 percent.