Understanding Credit Card Rates Better

?Fourth quarter earnings reports from major credit card issuing banks indicate that the card issuers are now in a better position than they have been for several years, and they are poised to return to more aggressive marketing of their products in 2012.
 
All of the major card issuers saw growth in their card balances in the final quarter of last year, while the delinquency rates hovered near record lows. That combination is due to credit cardholders using their cards more while staying current on their account balances at the same time. The result is likely to be a lot more new card solicitations in the mailbox, especially for those borrowers with good or excellent credit scores.
 
Much of the renewed optimism stems from the fact that at the end of the year most of the major card issuers saw growth in their card holder accounts. American Express reported growth of 4.5% in one month as its card accounts reached by December. Capital One saw its credit card loans grow 3.3% in December to $56.6 billion and Citigroup credit card loans totaled $75.9 billion in the fourth quarter, up 3% from the previous quarter. All of the major credit card issuers showed a drop in default and delinquency rates as the numbers of late payments topped out in 2010 and have steadily declined since then.
 
Capital One, American Express, Citigroup, JP Morgan Chase, Bank of America and Discover Card all saw their charge-offs and delinquency rates decline at the end of 2011.

He lower default rates help the bank’s bottom lines because they require them to hold less money against possible losses. At risk of being overly optimistic, it seems that American credit cardholders and credit card issuers alike have both made the changes necessary to bring the nation’s excessive credit card borrowing and lending habits back under control. By now, most of the borrowers who could not pay off their card debts are already in default, while the rest of the cardholders have paid down their balances to avoid penalties and even higher interest rates. The coming year could present an opportunity for a fresh start as the card issuers have eliminated most of their risky accounts, cut back the limits on millions of existing accounts, and tightened their lending standards to reduce the risk of defaults and late payments going forward.