Delinquent balances on U.S. credit cards reached record levels and defaults surged in December, according to Fitch Ratings, which warned that chargeoffs appear set to go even higher in coming months.
Credit card loans have come under pressure from the economic downturn. Even with the economy making tentative steps toward recovery and stock markets 10 months into a rally, unemployment is a persistent thorn in lenders' sides. Fitch said Tuesday that it expects U.S. unemployment to peak at 10.4% in the second quarter and remain in double digits throughout 2010.
"U.S. consumer credit quality remains under considerable stress due to persistently weak labor-market conditions," said managing director Michael Dean. "As a result, chargeoffs will retest their recent highs throughout the first half of 2010."
The rate for loans delinquent two or more months reached an all-time high of 4.54% for Fitch's December Credit Card Index, which is based on performance through the end of November. The previous record, 4.45%, was set in June.
Chargeoffs rose to 10.68% from 10.09% a month earlier.
