Credit card issuers had some good news this month as write-off rates have dropped down to 6.96 percent in the first quarter of this year, compared with a peak of 10.97 percent in the second quarter of 2010, according to data from the Federal Reserve.

For the five large credit card issuers pointed out in the table below, four of them reported declines, some continuing a trend they have been seeing for months. This is definitely affected at least partly by the fact that banks have already written off the balances of most customers expected to default, and those individuals have a hard time getting new credit cards.

Credit Card IssuerRate in AprilRate in MayPeak rate
American Express3.5%3.2%10.4% in April 2009
Bank of America8.25%8.03%10.53% in August 2009
Capital One (U.S. cards)4.97%4.84%10.87% in March 2010
Chase5.6%5.67%10.91% in January 2010
Citibank7.85%7.81%12.14% in August 2009

These numbers indicate that credit card users have been paying down their balances to adequately protect themselves against the economic uncertainty. In April, outstanding balances on revolving loans, which is mostly comprised of credit card expenditures, fell to $790.11 billion, a five percent decrease from $831.11 billion year over year. In August 2008, that figure was above a staggering $973.64 billion.

Credit card companies usually write off loans if they haven’t been paid after 180 days because they assume they will not be able to collect the remaining balances. Capital One waits six months to write off customers.

General credit card debt declines

Although Chase reported an increase in charge-off rates, like all the other issuers mentioned it remains well below its peak in January of last year. As long as banks continue to tighten up their requirements for getting credit approval, the write-off rates will continue to decline. That reflects the end of 2010 marking a two-year low in default rates, so it seems the economy is continuing to improve and credit card issuers are producing better cards for consumers.

Chase however did report a decrease in the rate of late payments for May 2011, reflecting the overall market. The industry-wide delinquency, or late payments, rate broadly declined for credit cards in the first quarter, down 3.89 percent from a 6.61 percent peak two years earlier.

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