Research, regulation, industry reports

Credit card charge-offs remain relatively low

While credit card charge-offs have gone up in the thrift industry, the increase is nowhere near the rate of increase from other types of loans, says a new Office of Thrift Supervision (OTS) document.

OTS reports that the thrift industry — which includes federal savings banks and savings and loan (S&L) associations — wrote off approximately 0.18 percent more bad credit card debt in 2008 than was written off in 2007.

This pales in comparison to the increase in the number of bad mortgage loans thrifts wrote off their books. S&Ls and federal savings banks wrote off more than four bad mortgage loans in 2008 for every one written off in 2007. Of all thrift industry mortgage loan assets, 58.3 percent were charged off in 2008, compared with 3 percent of thrift credit card assets. S&Ls have historically seen their mission as mortgage lending, and do relatively little credit card lending.

Loans extended by S&Ls and federal savings banks for land showed the biggest increase in charge-off rates, increasing by a factor of 119 over the past five years, and construction loans for single-family residences defaulted at a rate five times higher than the default rate in 2007, and 61 times higher than the default rate in 2004, the earliest year included in the OTS data.

Repossessions are also on the rise, says the OTS. Nearly 20 percent of thrift industry assets were repossessed in 2008, almost double the 10.5 percent repossessed in 2007.

Despite the relative stasis in credit card charge-offs, the Southeast region of the United States was hit the hardest in 2008 by thrift-issued credit card assets. Thrifts charged off over 7 percent of credit card debt in the southeast region from October 2007 to October 2008, 2 percent more than the average of OTS’s five regions (see map).

Credit card charge-offs among these institutions across the country were only 0.35 percent higher in 2008 than the four-year average — rising to 5.381 percent from 5.029 percent — which, when compared with total loan charge-offs almost doubling their four-year average, is a relatively minor increase.

See related: Credit card charge-offs rise 48 percent in August ’08

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  • Deanna – Michigan

    You should expect that to change this year if recent, dramatic changes made by Chase are a sign of things to come. Chase upped my monthly payment amount from 2% to 5%, nearly tripling the amount due. There were none of the standard triggers often cited when card issuers change terms. Nearly 800 credit, a 13 yr. account with consistent early payments in excess of amount due, low account usage levels etc. I believe this particular account was targeted because of it’s very low promotional preferred int. rate. While I can manage this change, others will not be able to do so and may be forced into default and, ultimately, bankruptcy. This seems a poor attempt by the issuer to improve their short term circumstances at the long term expense of retaining excellent customers. I intend to close my accounts and will remember, for a long time to come, just how I was treated.

  • chris

    Everyone wants to know how Obama is going to fix the economy as a whole? I want to know what he is going to do for people like me…or should I just quit my job and go on public assistance????
    Basically, I have one point to make…the credit card companies promise to work with you, and don’t; inflate interest rates on people who fall behind because they are using their credit cards to buy groceries and gas that they can no longer afford, and can’t afford the payment either; and finally the consumer’s credit rating is ruined for many, many years because the products and services are rising faster than their income…..what needs to be done? Someone needs to make it easier to repair our credit ratings. There needs to be a way for us to have hard times, but not ruin our financial positions for years and years.
    Let me give you an example: I went back to college with 3 children. I am now a teacher. A teacher has to student teach for atleast 6 mos. in order to get their license….work fulltime or free. As I was approaching my student teaching, my husband lost his job. I continued, putting us in serious credit card delinquency because it was all that was left to finish my degree and get a “good” job. Now, we can’t refinance our home, our debt is charged off and we are being sued, my car is on it’s last leg and we can’t get financing, and there is nothing we can do about it. Our credit is ruined for 7-10 years because we wanted a better life. My oldest will be in college by the time it resets and our middle child will be in high school. Not to mention the 50k in student loans I have because i chose to teach….

  • Robert

    What amazes me is the mentality of the credit card issuers. They are 1st inline to penalize the heck out of you when you slip, now the game has really changed even if you were a good paying customer they want to dial your card down and/or up the ante to force you to pay more, now what the hell kind of logic is that, if I am having a tough time paying the debt now what the heck makes them thank we will do better when it costs more. The other thing that Really pisses me off is the the economy is in the sewer and it’s getting worse by the day, don’t let anyone fool you no matter what the media and all those false hope setters say it’s going to dump before it gets any better (what ever better is) it has to for crying out loud bandages only work for awhile on a major wound eventually you will have to have it taken care of correctly. The bottom is there and it’s going to hit. Now I am not trying to be a negative thinker here but we need some real reality checks here it’s going to get tough. There’s been way to much loose spending going on for a long time, like the old saying goes spent money like a drunken soldier. It has to catch up and reset sometime. People are loosing their jobs/careers at an astronomical rate and do we really think that when (here’s the OZ thing) things calm down and there is some sort of stability in the economy (again whatever that will look like) that those nice paying Full Time and retirement/medical benefit jobs are back we will be able to buy mountains and live like kings again? Hell no, these scenarios will never reappear, the companies and business’s that give us those type of jobs will never again get themselves in a position where they will have to take care of you and nurture your family requirements as part of your job description and benefits. These employers want to completely in most cases hire you on the cheap, yes you can gather some sort of 401 blah blah blah and attempt to out of your pay for nice nominal unaffordable fee get a whacked out health care card and oh you want it to help cover your family too! Ouch watch out…Things we knew are gone and there will be a new way of buying/working/caring etc, so hang on folks it’s going to be a real rough ride on a not so safe roller coaster.
    Just my opinion and thoughts here by the way, trying to be a realist, the rich stay rich and the rest of us????time will tell
    Thank You