For the first time, monthly payment rates have exceeded the monthly portfolio yield rate. The news comes at a time when consumer debt has resumed at a brisk pace, and indicates that both revolvers and convenience users are in a very healthy situation for the first time since the start of the recession in 2001. For the month of October, the monthly payment rate hit 18.01% of outstanding balances while the monthly yield rate settled in at 16.77%. Payment rate is one of the most important performance variables for credit card-backed securities. Yield levels are affected by cardholder agreement terms and the annual percentage rate charged by the issuer, the percentage of convenience users in the portfolio, and the level of charge-offs and delinquencies in the portfolio. The yield has declined due to the low interest rate environment coupled with fairly high levels of charge-offs and delinquencies. However, charge-offs and delinquencies have shown recent signs of declining. Last week, the Federal Reserve reported that during October, Americans added $2.2 billion to revolving credit at an annual growth rate of 3.6%, more than twice the rate of growth one-year ago. For complete details on October’s portfolio performance statistics visit CardData ([www.carddata.com]).
(as of the month of October each year)
Year Payment Rate Yield
2000 14.80% 18.20%
2001 14.89% 18.30%
2002 16.19% 17.60%
2003 18.01% 16.77%
Source: CardData (www.carddata.com)