Studies show people are paying credit bills again

While credit card issuers are worried about lost revenue in the wake of the credit card reform act, they can take some solace in the news that people have started paying their bills again.

Nearly all card issuers, from big banks like J.P. Morgan Chase to store brand cards like Target Inc., reported fewer delinquencies in July than any other month this year. They also released figures indicating that they've had to charge-off less debt than any other month n the last year, according to a Wall Street Journal story printed Aug. 18.

U.S. card lenders charged off a net total of 366.8 million in July, which is equal to about 8.1 percent of all card balances in the country, according to a Bloomberg news report this week. That's a sharp decrease from last month when lenders wrote off 9.3 percent of debt.

Charge-offs typically occur after a credit card lender has not received payment for 180 days. Lenders then assume they will not receive payment and declare the debt uncollectible.

Lenders across the board had good news to report this quarter.

J.P Morgan Chase announced that its charge-offs fell from 8.38 percent in June to 7.95 percent in July.

Even American Express, somewhat protected from these losses by its affluent customer base, reported that charge-offs fell from 2.7 percent in June to 2.6 percent in July.

Beyond the improvement in charge-off numbers, card lenders have announced that accounts more than 30-days delinquent have also dropped off.

Furthermore, store brand cards, typically known to be higher-risks for card lenders, have seen the same improvements as general cards.

Along with indicating improvements in the economy, this could mean banks are just sorting through the bad debt and getting to the better debt-holders.

"Issuers have flushed through a lot of the bad debt, and we see yields increasing," Robert Hammer, who runs a credit-card consulting firm, told the Wall Street Journal earlier this week. "It's a win-win for private-label card issuers."

Either way, it's good news.

-Amanda H. Miller