Credit Card Debt Defaults Fall for September

USA credit card charge offs fell in September from the record highs of August, Moody's Investors Service said on Thursday, as US consumers used their tax refunds and other economic stimulus proceeds to lower their credit card debt. But delinquencies still rose, meaning more troubles ahead for the credit card industry.

The Moody's credit card charge off index that measures credit card debts that banks do not expect to be repaid fell to 10.72 percent in September from a record high of 11.49 percent in August. As well, debt payments late more than 30 days rose to 5.97 percent from 5.80 percent.

"This improvement in the September charge off rate index is due partly to the seasonal improvement in early stage delinquencies earlier in the year," Moody's said in a statement.

The ratings agency estimated that the charge off rate index will start to stabilize during the autumn months and will resume an upward trend closer to the end of 2009 and into 2010.

"The rising delinquency rates, along with an expectation of more rising unemployment rates, will bring higher credit card debt charge offs in the months ahead," Moody's said.

Credit card losses usually closely follow the unemployment trend, which rose in September to 9.8 percent, the highest in 26 years. The rating agency estimates that the charge off rate index will peak between 12 percent and 13 percent in mid 2010.

Data that was released by companies earlier this month based on the performance of credit card loans that were securitized showed defaults declined almost across the board, with Bank of America Corp and Citigroup Inc as the worst performers among the biggest credit card issuers.