Credit card issuers write off less bad loans in March `98

Journal Record, The (Oklahoma City), May 1, 1998

NEW YORK (AP) -- Consumers are doing a better job paying their credit card bills with the proportion of bad loans written off as uncollectible during March falling for the first time in three years, a leading rating service said Thursday.

But Moody's Investors Service cautioned that the improvement may be short-lived as ongoing consolidation in the banking industry stiffens competition and forces card issuers to relax credit standards to generate business.

Credit card issuers, responding to historically high late payments and growing bankruptcy rates, have chipped away at the amount of bad loans by becoming more picky in selecting customers and cracking down on those with overdue bills. Moreover, a strong economy and booming stock market has fattened the wallets of consumers, allowing them to use cash for many purchases and rely less on their credit cards. That keeps them from sinking into debt problems. Moody's said the group of card issuers that it tracks wrote off as uncollectible 6.63 percent of credit card balances in March. That was below the 6.72 percent in March 1997 and was the first year-over-year decline in three years. Edward O. Bankole, a vice president at Moody's, said the decline was not unexpected because the write-off rate has been easing slowly since it peaked at 7.10 percent in April 1997. Nevertheless, the improvement suggests credit card problems that have plagued issuers and cut into their profits "may be turning the corner," Moody's said. Consumers are doing more to pay their bills on time. Moody's said the percent of credit account balances more than 30 days past due declined year-over-year for the third consecutive month in March to 5.22 percent, from 5.45 percent last year.