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The U.S. credit card charge-off rate rose to a record high 10.76% of annualized prime credit card receivables in June, up 430 basis points from 6.46% in the same period a year earlier. The June charge-off rate increased 14 basis points from 10.62% in the previous month, according to Moody's Credit Card Index.
Moody's says the credit card sector will begin a recovery in mid-2010 when, according to its forecasts, charge-offs will peak between 12% and 13%, which will coincide with an unemployment rate that will max out between 10% and 10.5%.
The delinquency rate for prime credit card accounts at least 30 days past due declined to 5.81%, its lowest level of 2009, from 5.97% in May. The rate is 136 basis points higher than the rate of 4.45% in June of last year.
"If delinquencies continue to improve beyond the typical seasonal pattern, then a similar trend in charge-offs may follow," William Black, Moody's senior vice president, said of the report's findings. "Nevertheless, we continue to expect increasing industry-wide delinquencies to resume through the second half of the year."
