Credit card delinquencies ease

Delinquency rates at major US credit card issuers declined in March in yet another sign that the economy is on the mend.

Bank of America, JPMorgan Chase, American Express, Capital One and Discover Financial Services each reported a slight decline in the percentage of card payments that were at least 30 days late, a leading indicator of consumers’ financial health.

The results echo comments made on Wednesday by Jamie Dimon, JPMorgan chief executive, and Ben Bernanke, chairman of the Federal Reserve, about how the economy is showing signs of a rebound.

“There are strong indications that not only the economy but the financial condition of individual households is starting to improve,” said Stephen Brobeck, the executive director of the Consumer Federation of America, a lobbying group. “Consumers are increasing their spending and yet at the same time reducing loan delinquencies.”

Loan delinquencies tend to dip slightly in the spring as consumers use tax refunds to repay debt. But a strengthening economy is also giving people more confidence to spend. The government reported this week that retail sales in March jumped 1.6 per cent, more than analysts had expected and the largest monthly increase since November. Analysts warned that any recovery was still nascent and deeper problems persisted in the economy, including high unemployment and a weak housing market.

Although the future is starting to look brighter for credit card issuers as delinquency rates fall, they are still grappling with record high losses on uncollectable loans. Bank of America and Discover both reported a decline in charge-offs but other issuers saw the measure climb month over month.

At Bank of America, charge-offs fell to 12.54 per cent in March from 13.51 per cent in February. Delinquency rates dipped to 7.07 per cent from 7.23 per cent a month earlier. Discover said charge-offs dropped to 8.51 per cent in March from 9.11 per cent in February, and that delinquencies edged down to 5.39 per cent from 5.50 per cent.

JPMorgan saw delinquencies drop to 4.51 per cent in March from 4.67 per cent in February but charge-offs rose to 9.51 per cent from 9.21 per cent in the same period. At Capital One, delinquencies fell to 5.30 per cent from 5.51 per cent and charge-offs rose to 10.87 per cent from 10.19 per cent.

American Express also saw delinquencies fall, which bodes well for future business.