Target Corporation's credit card business is seeing good-news, bad-news indicators as the recession drags on. An encouraging sign is that balances owed by card holders who are behind on their payments declined in March. However, write-offs from unpaid bills continue to climb, according to regulatory reports filed Wednesday.
Target wrote off $101 million in bad debt in March, an annualized 14.2 percent of its total loans. That compares with 12.9 percent in February and 12.3 percent in January.
Overall delinquencies dropped 5.6 percent last month to $742.7 million, a sign of stabilization that likely is the result of the company's steps to tighten credit over the past year as well as the cold reality that much of the bad debt triggered during the holidays already is off the books. Balances owed by cardholders who have missed two payments, considered an early stage of delinquency, dropped 7.2 percent from the previous month.
Target, which has 31 million card holders, is hardly alone in seeing its credit operations take a hit in the past year. Fitch Ratings reported that its credit card charge-off index hit a record high of 8.4 percent in February. At U.S. Bank, credit charge-offs made up 6.3 percent of outstanding loans, compared with 5.2 percent in the previous quarter.
Target saw the spike in bad debt write-offs coming, and boosted its reserves to $600 million to cover the first half of 2009. The amount of charge-offs are in line with those estimates, the company said.
The size of Target's portfolio declined about 3.4 percent to $8.47 billion in March as consumers reduced spending and the retailer made credit available only to its most trustworthy customers.
JACKIE CROSBY
