Credit Card Defaults Rise to Record; No Recovery Until Mid 2010
Posted on | September 24, 2009 | No Comments
Credit card defaults rose to a record in August as Americans continue to lose jobs. There is no recovery expected in the credit card sector until Mid 2010. The Moody’s credit card charge-off index rose to 11.49% up from 10.52% in July. This upward movement comes after the first month of decline, July, in almost a year. The move high pretty much erases any thoughts of a quick recovery.
“We continue to call for a recovery of the credit card sector to begin once industry average charge-offs peak in mid-2010 between 12 percent and 13 percent,” Moody’s stated in a recent report. Credit card losses tend to follow the trend of unemployment. With unemployment current at 9.7% and likely to increase the same should hold true for credit card defaults.
Bank of America and Citigroup hold the most exposure to risky credit card borrowers so these two companies are expected to take a hit on their balance sheets. American Express and Capital One Financial have also posted monthly declines on chargeoffs as well. It will be very interesting to see how this industry performs over the next year.
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Author: Jeremy North
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