Shrinking Credit Card Defaults Cheer Issuing Banks

October 23, 2009
By: Joe Taylor

Credit card default rates have caught the attention of armchair economists over the past year. Officials from American Express told reporters that it wrote off just 8.4 percent of cardholder balances in September, down from a peak rate of 9.2 percent in July. Likewise, Discover Card reported a default rate of 8.69 percent in September, improving from the 9.16 percent figure the company reported for August. Commercial credit agency Moody's had previously reported default rates for some credit card companies as high as 11.5 percent in August.

However, shrinking credit card defaults can also indicate another symptom of an ailing economy. As more credit card companies restrict lending in advance of February's new industry regulations, some economists argue that a lower default rate simply means that fewer high-risk Americans have been able to gain access to accounts in the first place. Wall Street investors agreed with that analysis, with many credit card-related stocks dipping slightly after the announcements.

Important Note! The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we can not guarantee the accuracy of the information in this article. Please verify all terms and conditions of any credit card prior to applying.