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December 15, 2014

Positive stats to end the year

Some cheery cards statistics come to hand in an effort to end the year on a positive note

By Verdict Staff

Some cheery cards statistics come to hand in an effort to end the year on a positive note.

In the US, the credit card charge-off rate, at 2.89%, is at its lowest point since 1985.

Meantime, courtesy of the clever number crunchers at FICO, there is evidence of positive signs about spending on credit cards.The latest FICO FICO Benchmarking Service stats show that average total sales on cards issued in Ireland reached a two-year high in September of €778 per card, an increase of 9% compared with September 2013.

Veteran accounts (those five or more years old) had the highest average, at €791 per card. The ratio of monthly payment to balance reached 45%, also a two-year high. In another positive sign, the percentage of accounts that have missed two consecutive monthly payments fell to a two-year low.

A more sobering analysis hits the inbox from card analysts cardhub.com.

According to Cardhub, consumers are overdosing on credit card debt with US cardholders forecast to incur a total of more than $60bn in new credit card debt by the end of 2014, an increase of more than 55% over 2013.

Cardhub estimates that the average household’s credit card balance increased by $68 during the third quarter of 2014, and is now $6,870. It expects this figure to reach $7,126 by the end of 2014, "roughly $1,200 away from a tipping point at which minimum payments will become unsustainable and delinquencies will skyrocket."

In the UK by contrast, the most recent figures from the UK Cards Association show that at the end of the second quarter, total credit card outstandings (£56.9bn) accounted for just 3.9% of total personal sector outstandings and a proportion that has consistently declined since peaking at around 6.1% in 2005.

The level of credit card outstandings in the UK has been broadly flat over the past three year in sharp contrast to the US.Back in the US, ratings agency Moodys is at least positive on the sector. As CI goes to press it reports that charge-offs in credit card ABS will continue to decline in 2015, owing to a drop in the unemployment rate driven by ongoing US GDP growth, and improvement in the early-stage delinquency rate. Moodys forecasts that its Credit Card Index charge-off rate will drop to 2.5% by the end of 2015, from an average 2.8% year to date.

So Moodys is upbeat, despite general forecasts that interest rates will rise at some stage during 2015. It argues that excess spreads will remain at "current elevated levels because of off-setting lower charge-off rates and higher yields resulting from higher purchase volumes."

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