Credit card defaults fall to 15-month low

NEW YORK

Defaults on U.S. credit cards in July fell to the lowest level in 15 months, while late payments also declined, Fitch Ratings said Wednesday.

Late-payment rates for all the major credit card providers that Fitch tracks for its monthly credit card index showed improvement in July compared with June.

"The trends are encouraging, but card defaults are still elevated historically and are expected to remain so," said Michael Dean, a managing director at Fitch. "Unemployment will continue to weigh on consumer credit quality throughout the rest of this year and well into 2011."

Fitch's prime credit card charge-off index -- reflecting the portion of balances charged off by banks -- declined to less than 10 percent for the first time in 15 months. However, at 9.65 percent, the index remains more than 60 percent above its long-term historical average of 5.88 percent.

Banks charge off loans as unrecoverable after they're 180 days late.

Payments that were 60 or more days late dropped to 3.76 percent in July from 3.86 percent in June. It was the seventh consecutive month of improvement in late-stage delinquencies, which hit a 19-month low in July. That decline could set the stage for continued improvement in charge-offs, Fitch said.

Early stage delinquencies -- or payments that were 30 or more days late -- fell to 5 percent from 5.13 percent for the fifth consecutive monthly decline.

Fitch's credit card index includes general purpose portfolios originated by companies including Bank of America, Citibank, Chase, Capital One and Discover.