CREDIT CARD DELINQUENCIES UP; STILL MAKING BIG BUCKS

May 15, 2001

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Despite that fact that the delinquency rate on credit card receivables will show one of its largest one-month increases ever when April data are reported this week, the industry appears healthier than ever and should be unscathed by the increased charge-offs, according to Dow Jones, as reported by the American Bankruptcy Institute. The specter of deteriorating credit quality emerged from the early release of April 2001 loss data from Citigroup’s credit card trusts. In its monthly report of trust performance, Citigroup revealed that the charge-off rate on its credit card portfolio increased to 5.14 percent in April from 3.73 percent in March. This also compares with a 4.41 percent rate in February and 3.29 percent in January.

Charge-offs are up significantly due to a surge in bankruptcy filings, according to Michael Dean, senior director at Fitch Inc. A rise in layoffs, due to the slowing economy, also leads to higher delinquencies. Joseph Hahn, associate director at Standard & Poor’s, said that to the extent the current uptick in charge-offs reflects a new rush to file for bankruptcy ahead of changes in the law, rising delinquencies may not be a long-running concern.