New figures from Moody’s Investors Service show that the U.S. credit card charge-off rate reached a record last month.
The Moody’s credit card charge-off index increased from 10.62 percent in May to 10.76 percent in June. These figures reflect the proportion of credit card accounts that banks do not expect to be repaid.
In addition, the credit ratings firm said that defaults on credit card debt are likely to rise for the rest of the year and into 2010.
“We 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,” the Moody’s report said, as quoted by Reuters.
Defaulting on credit card payments is a serious transgression that damages a person’s credit score and makes it more difficult to get a loan in the future.
However, the rising unemployment rate – which stands at 9.5 percent and is expected to climb – has put more U.S. families a difficult situation when it comes to managing credit card debt and other financial obligations.
The Moody’s index showed that delinquencies, defined as payments more than 30 days late, decreased in June for the third month in a row.
Still, the company said this pattern is probably a seasonal trend as people apply their tax refunds to pay bills and slash their spending. Federal stimulus money could also play a part, Moody’s said.
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