Credit Card Trusts Performing Well Despite Rising Chargeoffs
Performance of major credit card trusts was strong in March, even though the annualized rate of debt that had to be written off rose 50 basis points.
Charge-offs continued to mount in March 2008 among the trusts in Standard & Poor’s Ratings Services’ U.S. bankcard Credit Card Quality Index (CCQI), as they have for the past year. But in spite of the 50-basis-point (bp) increase over February, charge-offs still remained well below the average high of 7.1% reported between 2002 and 2003. In addition, robust excess spread, which provides the first level of protection against defaults, and a high payment rate both contributed to solid trust performance in March.
S&P observed the following key patterns during March 2008:
- Charge-offs continued to rise, increasing 50 bps to 5.7% from February;
- Delinquencies in the 30- and 60-plus-day categories were unchanged at 4.5% and 3.2%, respectively, while 90-plus-day delinquencies were up 10 bps;
- The payment rate rose 50 bps to 19.1%; and
- Excess spread remained strong at 8.1%.
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