Delinquencies on U.S. prime credit cards reached record levels in December, and charge-offs began climbing toward a high set in September, according to data Fitch Group’s Fitch Ratings released Jan. 5.
Delinquencies on card accounts at least 60 days past due rose to 4.54%, surpassing the previous high of 4.45% set in June. Charge-offs on outstanding receivables in December rose to 10.68% from 10.09% the previous month.
Credit card charge-offs by mid-2010 may reapproach the previous record high of 11.52% set in September, Cynthia Ullrich, a senior director in Fitch’s asset-based securities group, tells PaymentsSource, a Collections & Credit Risk sister publication.
Credit card charge-off rates tend to closely parallel unemployment rates, which Fitch expects will peak at about 12% near the end of June. But charge-offs could spike much higher if consumer bankruptcies surge this year, Ullrich says.
“Bankruptcies are the wild card, and although no one can predict which direction that will go now, if we see a sudden rise in bankruptcies later this year we will likely see a rapid acceleration of credit card defaults beyond our projections.”
