Credit card delinquencies in December reached a record level of 4.54 percent, and charge-offs could climb higher in coming months, according to the latest Credit Card Index findings from Fitch Ratings.
Delinquencies – account payments late 60 days or more – surpassed the previous high of 4.45 percent set in June 2009.
Charge-offs – accounts deemed as uncollectible – crept up to 10.68 percent from 10.09 percent the previous month, Fitch reported. The charge-off rate remained below its high of 11.52 percent set in September 2009.
However, Fitch said charge-offs are poised to trend higher in coming months as high unemployment and debt burdens persist.
“U.S. consumer credit quality remains under considerable stress due to persistently weak labor market conditions,” said Fitch Managing Director Michael Dean. “As a result, charge-offs will retest their recent highs throughout the first half of 2010.”
Fitch expects U.S. unemployment to peak at 10.4 percent in the second quarter of 2010, and remain above the 10 percent level throughout 2010.
Gross yield, the measure Fitch uses to calculate interest, fees and interchange revenue collected on outstanding balances, continued to increase – reaching 20.21 percent.
Credit card issuers are raising interest rates ahead of reform laws set for full effect Feb. 22, Fitch reported.
“Since recent legislative changes will restrict dynamic risk-based pricing policies, issuers are mitigating against potential future risk by increasing APRs across their portfolios,” Fitch said.
