Nearly 80% of consumers now have little-to-no debt or a “comfortable” level of debt while the December Chargeoff rate was the lowest of all months in 2010- falling to 8.3%. Only 12% of those surveyed have “more debt than is comfortable” and 8% “have too much debt and have trouble paying bills,” according to M&T Bank research.
This coincides with and strongly reflects the non-seasonally-adjusted unemployment having hit its second to lowest month of the year in December to 9.1% while it sits at 9.8 for January. Research also indicates credit card defaults within the industry declined during 4Q/10 and the M&T Bank consumer loan COF rate dropped 23% throughout 2010.
According to Cardflash, Charge-offs are expected to continue improving- in conjunction with the unemployment rate- after having peaked in 2Q/10 at 10.4% and in January at 10.6%, respectively. This is compared to a COF rate of 3.82% in the two year leading up to the recession and an unemployment rate of 5%. Meanwhile, the U.S. savings rate has risen from about 2% in January 2008 to 5.3% in December 2010. This might be because 50% think the U.S. economy is “still in a recession,” which is down 6 percentage points from the 56% 10 months ago
(Cardflash Library, 2011-01-31).