In a sign that consumers may be getting a better handle on their credit card debt, American Express and Capital One both reported that credit card delinquency rates – the amount of accounts that are at least 30-days past due – fell in June.
The numbers from American Express show that delinquency rates fell for the third month in a row and now stand at 4.4 percent while Capital One reported that its delinquency rates fell for the fourth straight month to 4.77 percent.
But a look at the default rates – charges the company doesn’t expect to ever collect – paints a different picture.
American Express reported that its default – or charge off – rate fell slightly in June to 9.9 percent. However, Capital One’s charge off rate rose from 9.41 percent in May and now sits at 9.73 percent for June.
While the amount of customers 30-days past due may seem like an improvement over recent months, Sanjay Sakhrani, an analyst at KBW, says this is because those customers are moving from delinquency to default.
“A lot of the weaker customer base has already charged off,” he told Reuters. “You have a better core portfolio. But that is not to say that portfolio is not immune from what is going to be a weaker macro economic backdrop.”
Sakhrani went on to tell the paper that it’s likely that chargeoffs, which are already at a record high, will continue to rise – noting that more difficult months for the industry, and consumers, are ahead.
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