Distressed credit card balances on the rise

NEW YORK (AP) — It was a bumpy summer for credit card issuers, but most of the top banks reported that their customers continued to make their payments on time.

Default rates were down at four of the five companies that reported their August results by midday Thursday. Only Capital One Financial Corp. had an uptick in the rate of its write-offs of uncollectible balances.

Capital One also posted a slight increase in its rate of payments late by 30 days or more, which is considered an indicator of future default.

Discover Financial Services, American Express, Chase and Bank of America reported continued declines in both rates.

Citibank is expected to report August results to the Securities and Exchange Commission later Thursday.

The results were similar in July, with a few banks reporting slight increases but most reporting improvements in defaults, or charge-offs, and delinquencies.

Overall, both defaults and delinquencies have dropped sharply since hitting their peaks. Late payments, in particularly, are now at historically low points.

Charge-off rates for cards peaked in the second quarter of 2010 at 10.96 percent, according to Fed data, and were down to 5.6 percent in the latest second quarter. Monthly data from most card issuers has shown continued declines, which will be reflected in third-quarter figures. Industrywide delinquency rates were down to 3.62 percent in the second quarter, after peaking in the second quarter of 2009 at 6.76 percent.

One reason consumers are able to keep up with their payments is that balances have dropped sharply since the height of the recession. Lower balances translates to lower minimum payments.