US Credit Card Charge-Offs Up Almost 9% to All-Time High
Moody’s reports that credit card charge-offs advanced decisively in February to 8.82%, representing an all-time high in the 20-year history of the Moody’s Credit Card Index.
The percentage of delinquent borrowers also rose to 6.14% – a 17-year high.
Additionally, the principal payment rate index, a measure of cardholders’ willingness and ability to repay their credit card debt, slipped sharply. While the yield index staged a rebound despite persistently low interest rate levels, the excess spread index, continued to narrow as the jump in charge-offs more than offset the improvement in yield.
Despite the marked deterioration in collateral performance, Moody’s has watch-listed relatively few of the card-backed notes from the industry’s largest credit card issuers. Moody’s says that’s due, in part, to the explicit support (e.g. additional credit enhancement) some issuers have provided to their related ABS programs. HSBC, Bank of America, GE, and Citibank have (or announced their intention to) come to the aid of their ABS transactions.
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