More Cardholders Falling Behind on Their Payments
Three of the largest credit card companies in the United States JPMorgan Chase, Bank of America and Citigroup reported that more cardholders fell behind on their credit card payments in September signaling that credit losses will continue for the three banking giants for at least another year.
While the big three banks along with American Express and Discover said that the actual number of write-offs declined in September, there was an increase in the number of accounts overdue in the past 30 days. Typically that is a signal of future defaults and is not good news for the credit card industry or the economy as a whole.
Credit card issuers write off unpaid accounts after 180 days. Typically that means that they’ll be sold to collection agencies who will then go after the consumers that fail to pay.
The only major U.S. credit card issuer, all of which released their data yesterday, that didn’t report an increase in defaults and delinquencies is American Express. American Express wisely, for the most part anyway, avoided the subprime market, unlike their competitors who seemingly gave credit to just about anyone.
On the flipside, Capital One continues to struggle and were the only credit card issuer to report that they suffered higher losses coupled along with a higher percentage of late payments. It looks as though Capital One along with Bank of America may find it the most difficult to recover because of their huge exposure to consumers with questionable credit histories.
The big culprit here is of course the economy. Unemployment and credit card defaults usually track very closely with one another and the unemployment picture in the United States has not improved despite the fact that some economists are saying that the economy itself is showing signs of emerging from the recession.
Only when jobs are created and the unemployment rate begins to go down will we see true economic recovery.
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