The U.S. credit card sector posted mixed performance in January as charge-offs rose sharply, while early stage delinquencies declined for a third month in a row, according to Moody's Investors Service.
The writedown of uncollected credit card debt by lenders, or charge-offs, rose sharply to 11.15 percent in January, while early stage delinquencies fell below the 6 percent mark to 5.96 percent, according to Moody's Credit Card Indices.
The delinquency rate measures the proportion of account balances for which a monthly payment is more than 30 days late as a percent of the total outstanding balance.
"The improvement in the early-stage delinquency rate was contrary to seasonal patterns that typically lean toward rising early stage delinquencies this time of year," said William Black, senior vice president at Moody's.
"This month marks the first January since 2004 where early-stage delinquencies declined from the prior December, an improvement that is an encouraging indication of stability or improvement in charge-off rates by mid-year," said Black.
Moody's base expectation is for the unemployment rate to plateau for much of the second half of the year. Under this scenario, and if delinquency rate trends continue to improve, Moody's expects the charge-off rate to peak close to 12 percent during the next several months.
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U.S. Credit Card Charge Offs Up
Moody's base expectation is for the unemployment rate to plateau for much of the second half of the year. Moody's, isn't this the same organization that rated toxic residential mortgages as AAA as their "base expectation" was that home prices would not fall?
Moody's Investors Service