The last month of 2010 brought nearly a two-year low in credit card default rates as the nation’s largest banks reported their figures for December. These reports are said to be a hopeful indicator for the economic future.

Credit card lenders including Chase, Discover, Capital One and Citibank all reported lows in their charge-off rates, or the credit card accounts deemed uncollectible due to the consumers inability to pay off debt. Another positive sign for the future of finance—delinquency rates are also at a low. Because there are not as many consumers making late payments on their credit cards, continued decreases in charge-offs are predicted for the beginning of 2011.

Unemployment Rate Threatens Improvement

According to the FDIC website, charge-off and delinquency rates for quarter three of 2010 were at 4.59 for credit cards. This seasonally adjusted rate was a 1.92 decrease from the year prior. Although the the rate is on a steady decline there is still some work to be done before Americans will be back to where they were before the recession. One concern analysts have is the struggle to lower unemployment in the past year due to the strong correlation between defaults and the jobless rate.

If the jobless rate continues to stay high, many Americans will have an increased difficulty of paying off credit card debt. One reason for the decrease in charge-offs although the job market is still weak is the result of tighter lending practices. In 2010 banks were hesitant to lend to subprime borrowers because of all the regulatory changes in relation to the Dodd-Frank Wall Street Reform Consumer Protection Act, but it looks like 2011 may present a different story. Recently, there has been an increase in credit card solicitations sent to individuals across the nation.

Read: Subprime Credit Card Issuers Increase Marketing

Here is a chart of rate trends from the past 4 years:


Clearly, the rate is not where it was four years ago, yet it shows that there has been a steady decrease since the high of 6.61 in Q1 of 2009. Although the FDIC has yet to release Q4 Charge-Off and Delinquency Rates data for 2010, the previously mentioned reported lows from the nations largest lenders indicate that the FDIC figure will most-likely continue the decreasing trend.

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