Moody's noted that the early-stage delinquency rate, which measures account balances for which a payment is 30 days late as a percentage of the total outstanding principal balance, is running 14% higher than for the same period last year. Moody's expects this increase to translate into even higher charge-off levels in the first half of 2010.
TransUnion predicted a rosier outlook. It expects this trend to reverse by the end of next year, and forecasts that the 2010 credit card delinquency rate (the ratio of borrowers 90 days or more delinquent on credit cards) will decline from 1.07% at the end of 2009 to 1.04% at the conclusion of 2010. The projected 2.8% year-over-year decrease is significantly less than the 11% and 11.6% drops seen between 2007 and 2008 and 2008 and 2009, respectively. However, the expected year-end 2010 delinquency rate marks a 23.6% decrease from the same period in 2007 (1.36%).
"We anticipate that credit card delinquencies will decrease for the third straight year as consumers continue to keep incremental debt to a minimum and aggressively manage debt repayment. However, the decrease is projected to be smaller than in previous years, indicating that this might be the best consumers can do in managing delinquencies in the current economic environment," said Ezra Becker, director of consulting and strategy in TransUnion's financial services group, in a press statement.
But Moody's projection might be more on target. Credit card interest rates jumped dramatically this year in anticipation of the restrictions placed on lenders by the new CARD Act.
Even credit card holders with excellent credit histories got interest-rate increases of at least 5% to 10% on many of their cards. People with just one or two late payments saw their interest rates jump to 29.9% and higher. More and more people are deciding they can't take it anymore and choosing to file for bankruptcy.
Articles all over the Internet tell people how to stop paying their credit cards legally. If that movement catches on, expect Capital One and other credit card companies to see continuing increases in credit card delinquencies and charge-offs.Lita Epstein has written more than 25 books, including The Complete Idiot's Guide to Improving Your Credit Score.