Discover charge-off rate rises in May, but delinquencies fall in sign credit problems easing
By APTuesday, June 15, 2010
Discover charge-offs up in May, delinquencies fall
NEW YORK — The rate at which Discover Card balances were written off for nonpayment rose in May after falling for two straight months.
Discover Financial Services said in a regulatory filing Tuesday that its net charge-offs rose in May to $142.5 million, or 8.82 percent of balances, up from 8.42 percent in April.
Card companies write off loans after they’re 180 days past due, the point at which it’s assumed the balances won’t be collected.
In the past year, the industry has written off a record amount of loans as customers struggled to pay. The charge-off rate rose to 10 percent in the first three months of the year, from 9.5 percent in the fourth quarter of 2009, according to the Federal Reserve. That compares with a rate of 3.8 percent in the second quarter of 2007, before the recession began.
In a sign the May increase may be a statistical blip, Discover said its rate of loans 30 days or more past due slipped to 5 percent in May, from 5.2 percent in April.
Shares of Discover, based in Riverwoods, Ill., rose 38 cents, or 2.8 percent, to $13.78 in midday trading Tuesday.
