According to a recent report from Moody’s Investors Services, experts are predicting a credit card boom in 2012 based on the November figures published by the six main credit card companies.
The figures show that the rates for defaults and late payments have returned to normal following the recession.
One analyst from Moody’s Investors Services has stated that he actually expects the default rate to fall even further to below 4 percent. Considering the rate peaked at 10.44 percent around 18 months ago, this is an impressive decline.
This decrease is largely down to American consumers beginning to take a more responsible approach to financial matters by actively working to pay down credit card debts. However, this is not the only factor that must be taken into consideration.
The Washington Post recently published an article which revealed that around $75 billion in credit card debts has been charged off since the beginning of the recession. This means that credit card companies have written off these debts from their own books and passed them to various collection agencies.
Credit bureau TransUnion have reported that over 8 million American consumers have actually dropped out of the credit card market all together between the start of the recession and the end of 2010. It is safe to assume that some percentage of these consumers decided on their own to close accounts and cut up credit cards as the financial climate became more unstable, although it is equally likely that many of these consumers also had their accounts closed by credit card companies.
No matter which of these reasons is the major contributor, the one certainty is that most Americans are pleased that credit card debt is becoming much less of a problem for households all over the country.
This is good news for credit card providers who will be cheered by the improvement in their balance sheets after several years of being burdened by charge offs. They are now finding themselves able to reduce the provisions for future charge offs and can return to periods of high profits.
Just this past week, Discover Financial Services announced that they were increasing their dividend payments by 67 percent to 10 cents. As a result, the credit card issuers are seeing new ways to maximize on profits and taking market share from their competitors.
It is definitely a positive thing that for many consumers, credit card debts are no longer a major issue, so long as we do not re-create the circumstances which caused the problems in the past.
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