The ever-increasing rate of credit card defaults in the U.S. finally showed signs of easing in July as evidenced by regulatory filings from several large U.S. banks. The pullback was marginal in most cases, but the data is yet another piece of economic information that points toward the end of the recession.
JP Morgan Chase & Co, which is the biggest credit card lender in the U.S., said their default rate in July fell to 7.92 percent from 8.04 percent in June. Discover Financial Services and American Express both reported fewer defaults for the month as well.
Citigroup Inc., which is the largest domestic issuer of MasterCard, said defaults fell to 10.03 percent in July from 10.51 percent in June.
The July data follows a record high 10.79 percent default rate hit in June as the impact of bankruptcies and unemployment hit banks harder than ever this recession.
However, not every big bank saw a decline in its default rate. Capital One, which is the third biggest issuer of Visa credit cards, said in its filing that charge offs rose to 9.83 percent in July from 9.73 percent in June.
Also, many analysts believe the recent decline in defaults has been sparked by borrowers using their tax refunds to pay down debt levels, thus expecting the rise in defaults to continue into 2010.
Not surprisingly, credit card default rates fell after the first month unemployment dipped this year. Defaults generally track unemployment, as less Americans out of work means more borrowers who are able to service their debt. Although unemployment ticked down to 9.4 percent in July, the U.S. jobless rate is expected to surpass 10 percent before peaking, according to many Wall Street analysts
