Several large financial institutions, such as Capital One (NYSE: COF), Bank of America (NYSE: BAC) and JP Morgan (NYSE: JPM) reported Monday that credit card defaults fell in October. However, a rise in delinquencies was reported by several banks suggesting further struggles for the industry still lay ahead.
Capital One Financial Corp., in a regulatory filing, reported credit card defaults dipped domestically to 9.04 percent in October from 9.77 percent in September. However, the company did see a rose outside the U.S. with defaults rising to 9.49% from 9.24% internationally.
Capital One also reported an increase in its U.S. credit card 30-day delinquency rate to 5.72 percent, compared to last month’s rate of 5.38 percent.
JP Morgan Chase posted a more modest decline in defaults, with its charge-off rate falling to 8.02 percent in October from 8.12 percent a month earlier. Charge-offs represent the debt a bank does not expect to be repaid.
JP Morgan Chase reported a small rise in delinquencies to 4.95 percent in October, up from 4.69 percent the prior month.
Discover Financial Services (NYSE: DFS) also posted a modest drop in defaults, reporting a rate of 8.54 percent compared to 8.69 percent in September. Just like many of its peers, Discover also reported a slight increase in delinquencies to 5.72 percent from 5.57 percent.
The near-term horizon for the credit card industry may not look bright as the rise in delinquencies, changes in industry law and rising unemployment are all burdens on the sector.
Unemployment and credit card defaults are widely viewed as tracking together. U.S. unemployment hit 10.2 percent in October, marking a 26- year high.
Card issuers have taking proactive measures, closing millions or accounts deemed risky and lowering available credit limits on customers throughout America.
