Credit Card Chargeoffs Rise to Over 10%

Wow, the credit loss numbers keep getting worse and worse. And although a lot of observers like to attribute banks slashing credit lines and jacking up rates to pending pro-consumer rule changes, the more obvious culprit is their hemorrhaging portfolios. Banks tend to close the credit gate after the horse is in the next county, and are doing their best to bleed improve profits on their non-deadbeats.

From Reuters:

The U.S. monthly credit card chargeoff rate surpassed 10 percent and hit a sixth straight record high in May, Moody’s Investors Services said on Wednesday, as unemployment grew to a 26-year high.

The chargeoff rate index — which measures credit card loans the banks do not expect to be repaid — rose to 10.62 percent in May from 9.97 percent in April.

“We expect the chargeoff rate index to continue to rise in the coming months but at a slower pace, as it peaks at around 12 percent in the second quarter of 2010,” Moody’s senior vice president William Black said in a statement.

The Moody’s index also showed delinquencies — monthly payments more than 30 days late — fell to 5.97 percent in May from 6.34 percent in April.

However, the agency said it was due to a seasonal trend, as consumers used tax refunds to pay back debts, and estimated delinquencies will resume their upward trend.

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  1. Mo

    Interesting observation on trying to bleed non-deadbeats.

    I'm a "pay in full" credit card user. Last month, my bill showed that there was no minimum payment due. I thought to myself – wow – is this some deal I didn't know about? I called (Chase) and asked about this. I was told they gave customers a month "off" from paying the minimum amount. The rep. noted that I paid in full each month and informed me that if I didn't pay the bill, I would be charged interest. So it was a holiday from a minimum payment – but not an interest free holiday!

    I think you could say they thought they might be able to bleed this non deadbeat.

    what a bunch of crooks

  2. VG Chicago

    Good! Sounds like more Americans are pulling a MOWA on these criminal credit card issuers.
    MOWA = "Max Out, Walk Away".

    Vinny G. — frantically rushing out the door, and heading straight for the mall… credit cards in hand… :)

  3. VG Chicago

    Here's another gem from Citi: Citi boosting salaries to offset lower bonuses Check it out:

    Say, if you still have that Citi credit card hanging around in your wallet, now's a good time to pull a MOWA on these bastards.

    Vinny G. (having just returned from Sacks Fifth Ave, saddled 100+ new expensive items I have absolutely no use for… and I charged them all to my Citi card, but of course…LOL)

  4. BitterRenter

    I have paid my balance in full every month for years. Yet my credit card company charges 10% APR on purchases and has the nerve to charge 25% APR on cash advances. With those rates, I am tempted to return to using my checkbook instead of the credit card.

  5. Harlem Dad

    I recently paid off the last of some pretty severe credit card debt. And, wow, do I feel like a fool.

  6. VG Chicago

    Harlem Dad: It's MOWA time, my friend! :)

    By all means, don't tighten your belt just to pay off these criminals. These credit card companies are gangsters, sharks, the vilest form of animals in the financial fauna – lower than vipers.

    Family comes first! Get your kids all the fancy toys they've always wanted but you've been telling them you can't afford. Things like new bikes, Play Stations, nice clothes from GAP Kids. Get them iPods, MacBooks, all the music they want. Take them to DisneyLand and Seaworld this summer. They need to see Shamu's relatives. They deserve it. And they'll love you for that. You'll be their champ. Numero Uno Dady! Fill their hearts with joy! That's what matters in life — not whether some gangster was paid off on time or not.

    I just got my daughter 5 new dresses and roller skates. She's ecstatic! Tomorrow I'll get her a new bike. In three weeks I'll take her and my wife to Greece. She's already talking about the sand and the waves of the Adriatic (and she's only 3). She draws pictures about it. It sparked up her imagination.

    Vinny G.

  7. Bruce Krasting

    We have always had an adversarial relationship with our lenders.

    We have to write them monthly checks. They charge us stupid fees for any excuse they can create. Who do you hate more, your CC company, the IRS or your HMO?

    You can't mess with the HMO or the IRS but that CC company?

    Debt repudiation by a large number of card holders is not far away. The only reason to pay the minimum is to keep the remaining credit limit available for future use. When they cut those limits to the current outstanding level you take that incentive to pay away.

    A few years ago their was a craze to improve your credit score. It created access to debt/opportunity. That is no longer the case. No one is lending to anyone. No new store cards, no cc in the mail, no increase in limits, no cheap refi, no balance transfer deals.

    Access to credit got you a shot at the ultimate prize. You could buy a house and make a fortune like everyone else was doing.

    We now know that was a busted concept. There is no incentive any longer to maintaining a a good credit rating.

    The comments on this piece may be tongue in cheek. But I think they accurately reflect the state of mind of a very large chunk of the people who have a CC in their wallet.

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