Charge off rates hit 2010 lows for all lenders

The nation's six largest credit card lenders – American Express, Bank of America, Capital One, Chase, Citibank and Discover – all saw the rate at which they had to write off consumers' seriously delinquent credit card debt as being uncollectable slip to year-long lows, according to a report from The Associated Press. However, despite the lows, rates are still considerably higher than historical averages and pre-recession levels.

Federal Reserve data showed that the rate of defaulted credit card debt peaked in the second quarter of 2010 at 10.37 percent of all balances, the report said. In the two years prior to the recession, though, it averaged just 3.82 percent.

"There are some good improvements," Mike Dean, a managing director with industry tracking firm Fitch Ratings, told the news agency. "We've seen some better numbers there, but nothing to say, 'Wow!'"

The rate at which consumers' credit card debt is stricken from lender records is expected to continue to improve into the future as well, the report said. However, the national unemployment rate, which is still hovering around 10 percent could still hinder more substantial improvements until it begins to come down more significantly.

Currently, many industry experts believe that the lower charge off rates are due to two factors, the report said. First, consumers are being more careful in dealing with their credit cards in general, spending less and cutting into balances with higher payments. However, the default rates are also likely the result of many consumers who have already experienced financial troubles in the past and are now unable to obtain new lines of credit. As a result of these two considerations, lenders are only allowing the most trustworthy consumers to maintain accounts, ensuring fewer losses. In all, some 8 million consumers discontinued their use of credit card accounts in 2010 for one reason or another.

In the past, rates of default and delinquency moved more or less in concert with fluctuations in the nationwide unemployment rate, but since the recession began, the latter figure has plateaued while the former two have declined.