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Late credit card payments are dropping

NEW YORK — Late payments on credit cards have dropped to rates seen before the Great Recession, and defaults are also heading close to normal levels, reports from the nation’s top six issuers show.

A series of regulatory filings on Wednesday showed that May payment rates for most of the biggest card issuers were down to rates seen before the economic downturn.

In the case of industry-leading American Express, the rate of payments late by 30 days or more is far better than before the crisis, at 1.6 percent of balances on an annualized basis for May.

JPMorgan Chase’s card division reported a rate of 2.66 percent, last seen in mid-2006. Discover Financial Services also posted its best rate in more than four years, 2.88 percent.

Late payments, known as delinquencies in the industry, are widely considered an indicator of future default. As such, the low levels being reported bode well for default rates in coming months.

Banks typically write off credit card balances as uncollectible after payments reach 180 days late.

Amex also had the lowest default rate in the business for May, at 3.2 percent of balances annualized. Discover and Capital One were next in line, at 4.82 and 4.84 percent, respectively.

Even the highest default rate reported Wednesday, the 8.03 percent at the nation’s top card issuer, Bank of America, is back at the point the Charlotte, N.C. bank posted in late 2007, at the start of the recession. The next highest rate, Citibank’s 7.81 percent, remains above what the bank reported prior to the recession, but is well below its peak rate of 11.46 percent seen a year ago.

Industry wide, default rates, also known as charge-offs, dropped to 6.96 percent in the first quarter of this year, compared with a peak of 10.97 in the second quarter of 2010, according to Federal Reserve data.

“It continues to paint a good picture,” said Michael R. Dean, a managing director at Fitch Ratings who tracks the securities backed by credit card balances. Through the second half of the year, Fitch is expecting both delinquencies and defaults to continue to drop. Dean said he expects a plateau or slight uptick toward the end of the year or the beginning of 2012.

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