Canadian credit card debt performance stabilised in Q409 as the charge-off rate index pulled back to 4.86%, according to a new Moody's report. This follows a record high of 4.92% in the previous quarter.

Charge-offs are expected to continue to decline in 2010 as a result of fewer personal bankruptcies and lower unemployment. Bankruptcies in Q410 are predicted to be approximately 21,500, down from 25,000 in Q409.

"We expect the unemployment rate and bankruptcy filings - two key drivers of credit card performance - to improve throughout 2010 and for these trends to translate into better credit card performance," says Moody's vp and senior analyst Sumant Inamdar, who co-authored the report.

All metrics of card performance worsened on a year-over-year basis for the fourth quarter, but improved or were stable from the third to the fourth quarter.

The delinquency rate index, measuring the proportion of account balances for which monthly payment is more than 30 days past due, is often an indicator for charge-off trends. For Q409 it was 3.16%, higher than 2.79% a year before, but very close to Q309, which was 3.14%. The payment rate index improved again quarter-over-quarter, climbing 47bp in Q409 to 30.76%.

Credit card performance in Canada continues to compare favourably to that in the UK and the US, where charge-off rates are 10.54% and 10.31% respectively, each more than double the Canadian 4.86% rate.

Moody's Canadian credit card indices are composed of owned and managed portfolios of Visa and MasterCard issuers in Canada. As of 31 December 2009, it tracked the performance of approximately C$70.5bn in receivables, or over approximately 80% of the outstanding Visa and MasterCard credit card receivables in Canada.