Credit card defaults rise, payments slow as consumers cut spending
by January 7, 2009 3:04 pm 56 views
The Fitch Ratings agency reported Wednesday (Jan. 7) that U.S. consumer credit quality measures worsened last month as credit card chargeoffs rose and cardholder payment rates slowed “dramatically.”
Fitch expects its prime chargeoff index — now at 6.84% and 31% higher than year earlier levels — to reach 8% during 2009. The company cited increasing unemployment for the chargeoff and for consumer reductions on their monthly payments in December. Fitch’s Prime MPR (monthly payment) Index fell 246 basis points month-over-month to 15.96%, the largest one month drop on record.
“Consumers continue to struggle amid a rapidly deteriorating employment situation and from declining property values and other measures of wealth,” said Managing Director Mike Dean in the Fitch statement.
Retail (store card) chargeoffs surged to three-year highs as anticipated in light of the recent run up in delinquencies, according to Fitch. At 10.51%, Fitch’s Retail Card Chargeoff Index is 49% above year-earlier levels. Based on recent delinquency trends, Fitch said the rate could surpass 12% by midyear.
Balances more than 60 days past due have risen more than 34% since July, noted the Fitch report.