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Thread: Credit Card default rates reach a record high

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    Banned Melonie's Avatar
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    Default Credit Card default rates reach a record high

    (snip)"Bank of America—the largest U.S. bank—said its default rate, those loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.

    In addition, American Express, which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized.

    Credit card losses usually follow the trend of unemployment, which rose in May to a 26-year high of 9.4 percent and is expected to peak near 10 percent by the end of 2009.

    If credit card losses across the industry surpass 10 percent this year, as analysts and bank executives expect, loan losses could top $70 billion. "(snip)


    Unfortunately, this news story does not sort out the default rate on credit card accounts versus the percentage of total credit card debt dollars that are in default. The news story does state that a 10% loss rate across the industry is likely to occur this year. If so, then this implies that average credit card interest rates necessary for the credit card banks to 'break even' over the next year will be on the order of (100/90) * 1.10 -1 = 22.2%

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    Senior Member Blackstone's Avatar
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    Default Re: Credit Card default rates reach a record high

    Lucky for us, no one expects or requires the credit card industry - or any other financial services industry - to recoup their losses in one year.

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