Credit card issuers' account charge-off rates, already exceptionally low, remain on track to hit bottom later this year.
U.S. credit card delinquencies fell to a new all-time low in February, setting the stage for further declines in the average charge-off rate in coming months, Moody's Investors Service said in a March 20 report.
The average charge-off rate on outstanding balances fell a single basis point in February, to 4.97% from 4.98% in January, reaching its lowest level in more than four years.
The decline was an aberration from typical patterns, according to Moody's. The average charge-off rate "traditionally experiences an uptick" in February, as a result of higher delinquencies in September when consumers struggle to meet payment deadlines following summer vacations and facing back-to-school spending, according to the report.
This year, however, "a lesser percentage of those early-stage delinquent receivables rolled through to charge-off in February," Moody's said.
As a result, Moody's says trends bode well for the average charge-off rate to continue declining in the second and third quarters, ending 2012 at about 4%, "although the rate of improvement will slow during the year."
The delinquency rate in February on all credit card loans at least 30 days past due fell seven basis points, to 2.86% from 2.93% in January, hitting an all-time low, Moody's said.
The "positive seasonal effects" of tax-refund season this year likely will drive delinquency rates even lower through the spring, Moody's said.
Simultaneously, consumer revolving credit is showing some signs of growth, as "some originators are beginning to loosen underwriting guidelines," the firm said.