February 9,2009
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News: Credit Card Delinquencies Still Soar.
Fitch was left with delivering more bad news as the figures indicate more bad weather for the credit card industry in the forecast. We've reached record highs again in January. The weakened economy is still giving way as job losses continue to be unleashed. All this translates (almost directly) to more credit card payment delinquencies and defaults. As the job loss index rises, the credit card debt delinquencies index closely follows.
Managing director at Fitch, Michael Dean, stated: "U.S. consumers continue to struggle in the face of mounting pressures on multiple fronts, from employment to housing to net worth." The concern is that this recession will continue to deepen as businesses lay off by the thousands (75,000 in a single day!), causing escalating credit card defaults. Further exacerbating the situation is the rise of home foreclosures. The credit card consumer is being crushed like from a steamroller. What can they do?
The Fed has already stepped in with unconventional programs by lending as much as $200 billion to shore up lender and speculator confidence in credit card loans and many other types, as well. But, as the weather darkens, Fitch is reporting a 0.47 percentage point rise to 3.75% for the '60-day late' index for last month for ‘major credit card' debt. The worst since 1997.
The even more serious credit card ‘charge-off' (un-collectable) index rose 0.66 percentage points since December. The rate now (as of the report) stands at 7.5%. This represents a huge 40% jump. Again, this sets a record dating back to the last major reform in bankruptcy laws, enacted in 2005. As if that's not enough, Fitch reports that more is to follow. They predict that, by the second half of this year, charge-offs will reach a staggering 9%.
The Retail credit card industry hasn't come out of this unscathed either. They were looking at a 0.12 percentage point delinquency index rise, up to 5.2%. Although not good, at least, their news wasn't as bad as was for major credit cards.
This branded credit card industry managed to hold the line on charge-offs, something the major market cards have been unable to do. They stayed flat at 10.51%. But this standing figure is already phenomenally high. It's 44% higher than it was last year.