Fitch Inc. said it continues to see signs that the credit crunch will escalate into next year, and it said card chargeoffs may approach 10% by this time next year.

The rating agency had said in March that it expected the chargeoff rate to approach 9% by yearend as unemployment continues to grow and consumers' ability to service debt weakens.

Credit card issuers usually charge off receivables after they have been delinquent for 180 days, or within 60 days of a bankruptcy filing.

Fitch said Monday that many large issuers indicated "significant worsening" in second-quarter metrics as they released their first-quarter results. Few were even willing to forecast beyond the second quarter, because of economic uncertainty, the agency said, and as a result, card losses will be "meaningfully higher" this quarter.

The prime chargeoff rate, now 8.41%, has been rising steadily since hitting a low of 3.1% at the end of the first quarter of 2006.

Despite the negative trends, Fitch said that it believes downgrades in credit card asset-backed securities would be limited by issuers' efforts to stem the deterioration and preserve their ratings.

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