Rate of Uncollectable Credit Card Balances Drops in September


Five of the six largest U.S. issuers of credit cards reported a drop last month in charge-offs -- industry jargon for the percentage of credit-card balances deemed uncollectable. The drop suggests consumers may be making headway in their efforts to pay off their debts, according to the Associated Press, citing Securites and Exchange Commission filings by the financial institutions today.

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American Express Co. (AXP), Bank of America Corp. (BAC), Citigroup Inc. (C), Discover Financial Services (DFS) and JPMorgan Chase & Co. (JPM) each said September charge-offs were the lowest of the year. Only Capital One Financial Corp. (COF) reported a higher level of defaults.

Most of the banks also reported that the percentage of payments that were at least 30 days late fell to the lowest levels of the year in September, the AP said.

The drop in charge-offs and delinquencies indicates consumers have started to cut their debt levels. Record consumer debt helped lead to the most recent financial meltdown, while analysts have said the hangover from those debts has slowed the economic recovery because consumers are redirecting excess cash to pay off debt instead of buying goods.

The numbers also imply a continuation of credit-card payment improvements from the second quarter. The American Bankers Association (ABA) reported earlier this month that bank-card delinquencies fell 0.26 percentage points, to 3.62% -- the lowest level since the first quarter of 2001 and less than the 15-year average of 3.93%.