Fitch Ratings sees increased chargeoffs for store-branded cards, though delinquencies did decline

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A recent report from Fitch Ratings shows that credit cards tied to retail stores saw increases in defaults, while delinquencies declined, in November.

According to the firm, defaults – also known as chargeoffs – on these types of credit cards increased to 12.56 percent, which is an uptick of 1.22 percentage points when compared to the month prior. Prior to 2009, the record for chargeoffs for these credit cards was seen in January 2009 at 12.25 percent.

Last year saw that number surpassed five times, and a new record for chargeoffs was set in August at 12.81 percent. Michael Dean, managing director for the organization, said that despite the negative results for much of 2009, the firm has seen moderation when it comes to the rate of deterioration of the cards.

“Certain issuers have also tightened underwriting standards and become more selective when adding new accounts, which should help mitigate loss rates longer term,” Dean said.

Though chargeoffs increased in the latest report, late-stage delinquencies on store-branded credit cards saw a decline. The number of accounts that were more than 60 days late fell by 0.15 percentage points to come to 5.22 percent.

However, given the high rate of unemployment in the country, the firm expects that delinquencies and chargeoffs will remain at higher levels during the first part of this year. The unemployment rate remained at 10 percent in December, though many experts expect it to remain at least at that level for much of 2010.

Fitch Ratings also noted that joblessness, along with decreasing home values, will keep consumers from using store-branded cards as they try to get a better handle on debt management through the year.

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