Fitch Ratings reported Thursday that U.S. prime and retail credit-card asset-backed securities it tracks continued to “defy odds” despite elevated unemployment levels due to the impact of COVID-19.
The ratings agency reported continued positive trends including low charge-off rates and growing monthly payment rates – indicating consumers are not only keeping accounts current but are reducing debt levels as well.
“Fitch believes governmental stimulus and unemployment benefits, combined with broad payment deferrals have proven effective in bolstering the ability of impacted borrowers to stay current on credit card debt and pay down balances,” the report stated.
Using November’s distribution period for payments into ABS portfolios, Fitch noted that the 2.67% rate with the agency’s prime credit-card charge-off index is at its lowest point since December 2016. It is also under the 12-month average of 3.01%.
The rate had been elevated at 3.27% in March 2020 at the onset of the coronavirus outbreak, which resulted in a wave of business closures and a retreat in consumer spending.
Sixty-plus day delinquencies were stable at 0.82% month-over-month, according to Fitch.
Monthly payment rates for bank credit cards in November was at a year-to-date high of 32.27%, a higher rate than a year ago (30.78%) and “significantly” higher than 2021’s low point of 26% in July 2020. The gross-yield index (measuring interest, interchange and finance charges) of 20.63% is slightly above the 12-month average of 20.27%.
The retail credit-card index charge-off rate was 4.14% in November, the lowest level since the index was first published in 1996. The rate has improved for seven consecutive months, down from a peak of 7.32% in April 2020. “The improved charge-off rates have been partially driven by deferral programs offered to consumers to mitigate loss experience,” the report stated.
Delinquencies over 60 days of 1.87% is slightly higher than October’s rate of 1.78%, but is lower than the level from a year ago of 2.77%. November’s 60-plus day delinquency rate is under 2%, only the fourth time the monthly rate has fallen below that level in the history of the index.
The monthly payment rate on retail cards improved to 18.42%, up from 16.45% in June and 16.27% in November 20198, while the gross yield rose to 28.02% from 27.62% the month prior.
