July 17, 2009
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News: CC Defaults Continue To Rise 2nd Qtr
Major U.S. lenders continue to be plagued with large numbers of credit card defaults. Bloomberg reports that according to analysts major lending institutions including Bank of America (BoA), American Express (AmEx), and JPMorgan Chase & Co. will continue to experience high credit card defaults with the increased number of unemployment. Furthermore, now that most of Americans have received their income tax refunds, additional funds to pay card payments have been exhausted. Experts predict that Chase, the world's largest lender, reported defaults of $433 million for second quarter and expects to reach their all time high of 10% this next quarter. Bank of America, the nation's largest lender, reported June defaults of 13.86%, the highest number among the top U.S. credit card companies.
On the other hand, U.S. credit card delinquencies of up to 180 days, dropped; however, delinquencies between 30 and 59 days rose slightly at Chase, Discover Financial Services, and Capital One Financial Corp. This number is concerning because this is an indication of future write-offs. Analysts say that the nation's credit card defaults could rise to $82.4 billion if rates continue to climb near 18%. American Express wins in the Dow Jones Industrial Average and reports that card defaults for second quarter would be slightly lower than originally expected. The news sent AmEx's stock to climb slightly.
Capital One experienced a 1.28% rise in delinquencies of 30 to 59 days in June, spoiling a four month decline while their defaults rose to 9.73% from 9.41% in May. Capital One's defaults are not expected to peak until first quarter 2010 which is predicted to peak near 11%. Some experts have said they expect credit card defaults to top out by end of fourth quarter; however, others remain cautious saying the modest decline in defaults could be seasonal and a result of taxpayers receiving tax refunds. It appears the recession isn't over yet and experts say relief is not in sight until 2010.