Discover card defaults, late payments drop in Jan.

By Associated Press
Posted Feb. 15 at 2:14 p.m.

Discover Card customers started off the year doing better at paying their bill.

Discover Financial Services said in a regulatory filing Tuesday that it wrote off $90.3 million, or 5.75 percent of balances at an annualized rate, as uncollectible in January. That was down from $95.2 million, or 5.94 percent annualized, in December.

Card companies typically write off loans after they’re 180 days past due. January showed the lowest charge-off rate in more than a year for the Riverwoods, Ill.-based credit card company, which reported a top rate of 9.11 percent in February.

The rate of late payments also fell. Payments late by 30 days or more, known in the industry as the delinquency rate, dropped to 3.84 percent in January, from 3.91 percent for December. A year ago, the delinquency rate stood at 5.55 percent.

Delinquency is considered an indicator of default for what to expect for defaults, or charge-offs, in coming months.

Industry wide, the charge-off rate peaked in the 2010 second quarter at 10.37 percent of balances, according to the latest Federal Reserve data. In the two years prior to the recession, it averaged 3.82 percent.

The improvements came as consumers turned to using credit cards more often during the holiday season, after pocketing their plastic throughout the recession. Fed statistics show credit card debt edged up in December, halting a two-year decline. Total revolving debt held by U.S. consumers — which is mostly credit cards — rose to $800.5 billion in December, after dropping steadily since the summer of 2008, when it topped $973.6 billion. The total is now at about the point it was in early 2005.

In midday trading, Discover shares slipped 6 cents to $21.74.

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