Equifax Reports Card Write Offs Lowest in Years
The rate at which credit card loans have to be written off has fallen sharply since 2010, according to Equifax, one of the three nationwide credit reporting bureaus.
Equifax's National Credit Trends Report announced that card charge offs currently stand at 5.53%, a full 39% lower than 2010 levels while charge offs of card accounts offered by retailers stood at 8%, 26% lower than last year's.
Cumulative revolving card balances peaked in October 2008 at more than $752 billion, and despite a recent uptick attributable to seasonal purchase activity, have since declined by almost 20% (December 2011 cumulative revolving card balances stand at $604 billion), Equifax reported, adding that consumers total debt load had also dropped.
The consumer research firm reported that total consumer debt outstanding (which includes first mortgage, home equity, consumer finance, auto, student loan, retail credit card and bank credit card) also peaked in October 2008 at $12.4 trillion.
In December 2011, U.S. consumers carried $11.1 trillion in total consumer debt, representing a decrease of more than 10%, Equifax said.
“Declining write-offs, growing card originations and the stabilizing of card balances are a precursor to balance increases, which can help to return the banks to profitability in this lending sector,” said Michael Koukounas, senior vice president of Special Client Services for Equifax.
“The industry is experiencing sustained improvement in consumers’ payment behavior and overall reduction of debt, a trend that seems to indicate more responsible lending and borrowing habits among card issuers and consumers alike,” Koukounas said.