Credit card performance in October was varied as consumers continue to bear high unemployment rates and a lack of available credit. Charge-offs declined for the second time in three months, but delinquencies resumed their upward trend, according to Fitch's Prime Credit Card Index results.
Charge-offs on prime credit card portfolios fell to 10.75% of outstanding receivables, 77 basis points lower than the previous month's 11.52%.
"U.S. consumer credit quality measures remain pressured and charge-offs will stay high until we see some improvement in employment conditions and in delinquency trends," Michael Dean, Fitch Ratings managing director, said in the report.
Delinquencies in excess of 60 days reversed their downward trend in October, increasing to 4.22%, 16 basis points higher than September's rate of 4.06%.
"While somewhat seasonal, the rise in delinquencies provides further evidence that charge-offs will remain elevated in the coming months," said Cynthia Ullrich, Fitch Ratings senior director.
Late stage delinquencies are running 33% higher year over year, according to Fitch's report. Early-stage late payments increased for the month as well, with delinquencies in excess of 30 days rising 13 basis points.
Despite the continuation of some unfavorable trends, Fitch expects current ratings of senior credit card ABS tranches to remain stable given available credit enhancement and structural protections afforded investors. The outlook for subordinate tranches remains negative. Fitch expects U.S. unemployment to peak at 10.3% in the second quarter of next year and remain above 10% throughout 2010.