Chargeoffs Returning to Normal Levels
After several years of historic lows, credit card chargeoff rates are starting to return to normal levels, according to Fitch Ratings latest quarterly Movers & Shakers index.
Credit card chargeoffs occur when a bank has written off a debt as uncollectable because the customer has not made the minimum payment for 180 days.
Chargeoff rates rose to 2.82%, ending the first half of 2016 about 6.5% higher than year-ago levels.
Since delinquencies remain at record lows, though, chargeoffs are unlikely to rise significantly in the near future. In fact, the numbers indicate that most consumers are making their monthly payments on their credit cards. Not only did delinquencies fall below 1% last quarter, payment rates reached record levels and rose to 28.40%.
“We expect chargeoffs to slowly rise to more normalized levels but still remain well within expectations over the second half of this year,” said Senior Director Herman Poon.