Creditnet News Story

Cap One reports increase in charge offs for January

Thursday, February 18, 2010

By Thomas Astery

Delinquencies also rise in the month.

Recently, Capital One Financial Corp. reported that both delinquencies and defaults on credit card accounts increased in January.

According to a filing with the Securities and Exchange Commission, the bank said that charge offs on credit card accounts increased from 10.14 percent in December to 10.41 percent in January. Charge offs are debts that a company no longer expects it will be able to collect.

Capital One also said that 30-day delinquencies for credit cards increased in January to 5.8 percent, up from the 5.78 percent reported the month before. As delinquencies increase, so could charge offs as consumers fall further behind on their payments.

Given that charge offs continue to increase for some lenders, they may face the possibility of being more careful when it comes to whom they make credit card offers. In order to minimize risks, some financial institutions are raising requirements on minimum credit scores for those applying for accounts, including credit cards.

A recent report from the Federal Reserve Board shows that revolving consumer credit dropped 9.5 percent in 2009. Though that may mean more consumers are paying off their debts, it could also mean that card companies are facing more charge offs, which affect the rate reported by the Fed.