Capital One Reports Late Payments Increasing

On Thursday, Capital One Financial Corp. reported that their credit card users’ late payments are increasing for the third consecutive month. The bank found that the number of cardholders who were 30 days or more late on their payments increased 3.43 percent of consumers’ balances. In July the figure was 3.37 percent.

Since May, when the number was 3.32 percent, the percentage has continued to increase. The increase is abnormal, as the figure had been declining for the previous 16 months. This number is still below the highest level it was in January 2009— when it was 5.8%.

That number is a significant indicator of account default and credit card charge-offs by consumers and banks. Credit card charge-offs are also on the rise, after a straight eight month decline. A charge-off is when the banks sell off the balances of delinquent credit card accounts that haven’t been paid in six months. The accounts get sold to debt collection agencies, who then contact the credit card holder about settling the debt.

In August, Capital One charged off $183 million, which is equivalent to 4.1 percent of their balances. In one month’s time, the total of charge-offs grew $14 million. In July, charge-offs only occurred on 3.77 percent of credit card balances, according to data by the Securities and Exchange Commission.

While the numbers are increasing, it is far lower than the 10.87 percent default rate that the bank felt in March of 2010.

For international cards, Capital One found that the charge-off rate was 6.21 percent in August, which was down from last month’s 6.59 percent reading. Late payments on international cards showed a slight increase. From July to August, international late payments rose .02 percent, from 5.34 to 5.36.

Capital One’s automobile loan department saw charge-offs rise as well. In August, the auto charge-off rate was at 1.94 percent, which was up from July’s reading at 1.79 percent. Also, in August, the rate of automobile loan defaults rose as well. In July it was 6.84 percent, this month it sits at 7.08 percent.

Capital One has been faring better than other banks, but has still had their share of financial mishaps during the economic recession. They are still fighting their way on the stock market and figuring out new ways to generate revenue after the passage of the CARD Act of 2009, which made it harder to for banks to manipulate the consumer. Even though credit card applications are on the rise, consumers are getting denied left and right because banks have made it harder for a consumer with a poor credit score to access credit. This may be why bank shares are dropping at such an alarming rate. Today in morning stock trading, shares for Capital One dropped 87 cents down to $42.65 a share.

Credit card charge-off is a serious issue for both banks and the consumer. Consumers can avoid credit card charge-offs by paying off their account balances in a timely fashion. If consumers find it hard to consolidate and eliminate their debt, a balance transfer might be a helpful option. As you can put your debt in one area and pay it off at low or sometimes no interest.