NEW YORK--(BUSINESS WIRE)-- Caution still reigns supreme among U.S. consumers as credit quality measures are still improving rapidly, according to latest Credit Card Index results from Fitch Ratings.

Credit card defaults registered the second largest monthly decline since the passage of the Bankruptcy Reform Act in 2005 and are now back in line with historical averages. In addition, both prime card monthly payment rate (MPR) and late stage delinquencies improved, while yield and three-month average excess spread dipped during the June collection period.

'U.S. consumers are charging less and swiftly paying off existing balances in increasing numbers,' said Managing Director Michael Dean. 'Default rates are also pulling back more quickly than anticipated and appear poised for further improvements in the coming months.'

Although economic conditions have been mixed, overall ABS performance in the meantime is pointing in the right direction. U.S. consumer credit rose in June and marked the ninth straight month of growth. However, consumer spending, a big contributor to the U.S. economic growth, dropped in June and marked the first decline in two years. It reported a marginal 0.1% increase in the second quarter as a whole, in a reflection of still the weakened state of the economy. Total nonfarm payroll employment did rise by 117,000 in July, following little growth the prior two months.

Continuing its course on an improving trend, Fitch's 60+ day delinquency index for the 18th consecutive month declined further by 11 basis points (bps) to 2.46% in July. After experiencing its peak during the beginning of 2010, current delinquency levels are approximately 46% lower. Early stage delinquent balances, associated with borrowers who have missed at least one payment, remained steady at 3.34%.

As expected from the prolonged decline of delinquencies, credit card chargeoffs registered its fourth straight monthly improvement in July. Particularly noteworthy this month was the fact that defaults dropped 96 bps to below 7% for the first time in 2.5 years at 6.33%. The one percent drop marked the second biggest decrease since the bankruptcy reform act was enacted towards the end of 2005. Every trust included in the index reported positive movements in defaults for the month. However, chargeoffs remain roughly 6% higher than the historical average of 5.99% since 1991.

Monthly payment rate performance also made a splash in the news this month as it improved to an all-time high by increasing 36 bps to 21.76% in July. 'Consumers are continuing to show fiscal restraint by making more on time payments and paying back their card balances quicker,' said Director Herman Poon. This level set a historic record since the inception of the index back in 1991. Fitch expects payment rates to remain at current levels as the pristine quality of card borrowers has never been better. MPR is approximately 25% higher than the historical average of 16.30%.

However, yield and excess spread on a three month average basis both dipped in July. Gross yield decreased 67 bps to 20.17%. After registering a new record from the previous month, the three-month average excess spread bounced back below to 10.73%, but still remain 24% above last year's levels. 'The discontinuation of discount options are beginning to take effect by eating into excess spread,' said Poon.

Fitch's Prime Credit Card index was established in 1991 and tracks more than $146 billion of prime credit card ABS backed by approximately $251 billion of principal receivables. The index is primarily comprised of general purpose portfolios originated by institutions such as Bank of America, Citibank, Chase, Capital One, Discover, etc.

ABS ratings on both prime and retail credit card trusts are expected to remain stable given available credit enhancement, loss coverage multiples, and structural protections afforded investors.

Additional information is available at www.fitchratings.com.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

CONTACT:

Fitch Ratings
Herman Poon, +1-212-908-0847
Director
Fitch Inc., 1 State Street Plaza, New York, NY 10004
or
Cynthia Ullrich, +1-212-908-0609
Senior Director
or
Michael Dean, +1-212-908-0556
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Professional Services  Finance

MEDIA: