Moody?s Card Index Falls, Remains Strong

Moody’s reported today that its Credit Card Indices performed poorly in the third quarter with a delinquency rate of 3.89 percent, up nearly 8 percent from the same period a year ago. However the card index remains strong by historical standards, with delinquencies below the long term average of 4.86 percent, according to Moody’s.

The charge-off rate for the 3rd quarter rose from 4.06 percent to 4.59 percent, the third consecutive quarter that has seen a rise from year-ago rates. The rate also remains below historic standards, including the high water mark 6.29 percent average in 2004, the year prior to the enactment of the new bankruptcy law. 

Moody’s projects charge offs to rise for the rest of this year and 2008, “due mainly to an expectation that bankruptcy filings will continue to rise to a level at or near levels achieved prior to the October 2005 change in bankruptcy law.”

The third quarter payment rate fell to 19.24 percent from 19.46 percent in the third quarter a year ago, the third consecutive year-over-year decrease in the quarterly payment rate.

The yield on the card index increased to 19.59 percent from 18.73 percent. Yield is the annualized percentage of income, primarily finance charges and fees, collected during the month as a percent of total loans.

The Moody’s card index tracks the performance of more than $440 billion in U.S. bank credit card loans backing securities rated by Moody’s.