Yesterday, credit rating agency Fitch Ratings said that for the second month running the rate of credit cards payments more than 60 days past due reached an all-time high.
When a bank considers a loan to be “uncollectable” it will move the bad debt off its balance sheet. These chargeoffs, or credit card payments typically in 180 days of delinquency, reached 7.4 percent at the end of January and are likely to keep rising, says Fitch.
“As the unemployment rate accelerates and consumers’ ability to service their debt weakens, Fitch anticipates that gross charge-offs will surpass 8.5 percent by mid-year and approach 9 percent by year end,” said Fitch senior director Cynthia Ullrich.
A number of banks with large credit card businesses are likely to take a big hit given the increasing number of late payments, according to an article on CNN Money.
Banks still reeling from the pain of bad mortgages now wonder how much they will suffer from credit card delinquencies. CNN Money says a number of banks have been keeping larger sums of money in reserve to cover losses in the credit card business.
Have you had your credit limit lowered or account closed recently? Experts say those are two additional ways banks are dealing with mounting losses from their credit card programs.
Late credit card payments are not only taking a toll on banks, they are likely affecting an individual’s credit history. A solid record of on-time payments is considered a positive factor in calculating your credit score.
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