Banks
Credit Card Defaults Rise Again in December
The Associated Press
01/07/09 - 02:12 PM EST
NEW YORK -- U.S. consumers fell further behind in paying off credit cards last month, a trend that's expected to worsen this year amid growing unemployment, Fitch Ratings said Wednesday.
An index of charge-offs on so-called prime credit card portfolios rose in December to its highest level in four years, while the rate at which cardholders repaid outstanding balances slowed to its lowest since mid-2004, Fitch said.
Charge-offs are loans written off as not being repaid.
Fitch said its prime charge-off index in December grew to 6.84%, rising 31% higher than a year earlier. Fitch forecasts the rate will reach 8% this year as job losses spread.
Charge-offs by retailers for store-issued cards surged last month to a three-year high of 10.5%. Fitch said the latest figure is 49% higher than the retailer charge-off index in December 2007. Fitch expects the rate to surpass 12% by midyear.
The charge-off rate measures the amount of balances written off as uncollectable as an annualized%age of total loans outstanding.
In December, an index that tracks repayment of outstanding card balances recorded its sharpest one-month drop on record, dropping to about 16% from more than 18% the previous month, Fitch said.
"Consumers continue to struggle amid a rapidly deteriorating employment situation and from declining property values and other measures of wealth," said Mike Dean, a managing director with Fitch.