Credit Card Delinquencies and Losses Still Rising

Credit card losses were sharply higher in March 2002 compared to one year earlier. Delinquencies were up in the first quarter as well, although the rate of deterioration in delinquencies has slowed, according to Moody's Investors Services.

Moody's Credit Card Indexes track the performance of about $335 billion of securitized credit card receivables. The chargeoff rate (dollar amount of loans written off as uncollectible, as an annualized percentage of total dollars of loans outstanding) jumped to 7.06 percent in March, the second highest level in the thirteen-year history of the indexes (see figure below). The previous high was in April 1997. Moody's analysts were quick to point out that some unusual, one-time accounting factors related to the handling of delinquent accounts following the events of September 11, 2001 contributed to the sharp rise. Correcting for one large issuer's adjustment (MBNA), Moody's analysts recalculated the chargeoff index to be 6.60 percent, up 81 basis points from March 2001. The chargeoff index has risen six consecutive quarters from year-earlier levels.

The delinquency rate (dollar amount of loan balances 30 days or more past due as a percent of total dollars outstanding) was 5.31 percent in March 2002, up 20 basis points from one year earlier. The delinquency index has risen on a year-over-year basis for five consecutive quarters, although the most recent change was the smallest.

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