Credit Card Late Payments Flirt with New Highs, Fitch Says

credit cardsCredit card late payments that were more than 60 days overdue continued an upward trend, falling just short of record highs, according to Fitch Ratings.
Fitch’s latest credit card delinquencies report for October shows late payments rising to their highest levels in five months. And, as credit card issuers fear, delinquencies generally signal higher charge-offs, or card loans deemed uncollectable.
“Credit card delinquencies are on the rise again and cardholder defaults will re-test recent highs as we head into the new year,” said Fitch Managing Director Michael Dean. “Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets.”
Charge-off rates, or defaults, usually follow the trends in unemployment rates. Last month, the jobless rate hit 10.2 percent, the highest since the early 1980s.
A report Tuesday showed that private employers shed 169,000 jobs in November, less than in October, but above some estimates. Fitch projects that unemployment will peak at 10.3 percent in 2010, but remain above 10 percent throughout the new year.
Fitch reported that late payments in October rose 19 basis points to 4.41 percent, following a similar increase last month.
Early-stage late payments were up for the month as well, with 30 days or more late payments increasing 21 basis points. Late-stage delinquencies are now 31 percent higher on a year-to-year comparisonand, just below the record high of 4.45 percent set this past June.
For October, Fitch reported that charge-offs declined 66 basis points to 10.09 percent, marking the third consecutive improvement. Despite that, charge-offs remain 55 percent above year-earlier levels.
“The charge-off improvement is expected to be short lived given the recent delinquency trends,” said Senior Director Cynthia Ullrich.
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