Credit card defaults are climbing toward the record highs set early this year as more consumers fell behind on payments in October and unemployment surged above 10%, Fitch Ratings said Wednesday.
Loans at least 30 days past due, a gauge of future writeoffs, rose to 5.83% of total loans in October, compared with 5.62% in September, Fitch said.
"Cardholder defaults will retest recent highs as we head into the new year," Fitch analyst Michael Dean said in a press release. "Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets."
U.S. unemployment, which climbed to a 26-year high of 10.2% in October, will peak at 10.3% in the second quarter and remain above 10% throughout next year, Fitch said.
Credit card defaults, which fell in October to 10.09%, from 10.75% in the prior month, may reverse course and rise toward the record 11.52% set in August, Fitch said. Banks typically write off loans after 180 days.
"The chargeoff improvement is expected to be short-lived, given the recent delinquency trends," Fitch analyst Cynthia Ullrich said in the release.
Fitch's statement came after a Nov. 23 report from Moody's Investors Service, which said delinquencies had risen to their highest since April as five of the six biggest card lenders reported increases.