Over the past few months, banks had been releasing some promising figures regarding credit card defaults – but new data suggests that any signs of improvement may not be lasting.
The latest figures from major lenders implies that previous progress could be more accurately credited to seasonal factors and Americans paying down credit card debt with their tax refunds, according to Bloomberg.
Banks including JPMogan Chase, Bank of America, Citigroup and Discover all reported an increase in credit card defaults – also known as charge-offs – during August. Charge-offs reflect credit card accounts that issuers deem uncollectable.
In particular, BofA reported that charge-offs climbed from 13.8 percent to 14.5 percent last month, while Citigroup saw a rise from 10 percent to 12.1 percent during the same period.
Although Capital One noted that its default rate improved somewhat in August, at the same time its delinquency rate crept up from 7.5 percent to 7.6 percent. Delinquencies – when customers are late paying down credit card debt – are considered to be a strong predictor of default.
So, if the economy seems to be improving, why are consumers still struggling with credit card debt?
Analysts say one major factor causing financial stress is the employment rate, which rose to 9.7 percent last month, with many experts predicting it could surpass 10 percent later this year or in early 2010.
Meanwhile, some say that despite the rising charge-off figures, the U.S. economy is actually well on the road to recovery.
In a speech to investors in Japan, Bank of America CEO Ken Lewis explained that “banks always experience their worst losses long after an economic recovery is already under way.”
Similar Posts:
- Credit card defaults up at major lenders
- Credit card defaults, delinquencies decline in July
- Late payments on credit cards up, defaults down
- Credit card write-offs fall at AmEx
- Fitch: Credit card charge-offs on the decline
Recent Comments