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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% for the same period last year. The June charge-off rate increased 14 basis points from 10.62% the previous month, according to Moody's Credit Card Index. The credit card sector will begin a recovery in mid 2010 when, according to its forecasts, charge-offs will peak at between 12% and 13%. That would coincide with an unemployment rate that will max out at between 10% and 10.5%, Moody's says. 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 4.45% rate in June 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 industrywide delinquencies to resume through the second half of the year."
