Credit card charge-offs hit a 20-year high in February, Moody’s reports. The agency blames soaring unemployment numbers, and expects charge-offs to reach double digits this year.
The amount of credit card debt being written off as a loss by issuers has reached a 20-year high as unemployment continues to soar.
According to Moody’s, credit card charge-offs — the amount of credit card debt deemed as uncollectable — climbed to 8.82 percent in February, up 1.02 percent since January. The sixth-consecutive increase dealt another blow to several large credit card issuers and closely follows growing unemployment numbers.
Officials at Moody’s predict charge-offs to reach double digits by the end of 2009, and say they will peak at 10.5 percent in the first half of 2010 if unemployment numbers crest at 10 percent concurrently.
Not surprisingly, delinquency rates — the percent of cardholders defaulting on a payment — also advanced in February. Moody’s cited the rate at 6.14 percent in February, up from 5.94 percent in January. The increase doesn’t raise any red flags, however, because historically, delinquency rates max out in the early months of the year and drop after tax season, Moody’s says.
Cardholder’s willingness and ability to repay credit card debt also experienced a dip, diving to 15.16 percent in February. The decrease is blamed on lower payment rates across the globe and the fact that February has the fewest number of collection days.
See related: Credit card charge-offs hit record high in January