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Credit Card Charge-Offs – Moody’s Records a Spike

According to the Moody’s Investors Service, there is a spike in credit card charge-offs last August. The Moody’s Credit Card Index recorded a jump in charge-offs to 11.49 percent during that month from 10.52 percent in July. This is up by 6.8 percent from one year ago. Will Black, the senior vice president of the organization said that “August had traditionally begun a seasonal period when delinquency rates start to rise, and this August is no exception.”

The delinquency rate seen last August is a reversal of the earlier trend of declining charge-offs in the previous months. In addition, Moody said that the charge-off rate may not be at its peak yet; it projects that it will be at its highest next summer at 12 to 13 percent. This figure is influenced, to a large extent, by the increasing unemployment rate which at this point stands at 9.7 percent. A lot of Americans today are struggling to achieve debt relief. It is expected that unemployment will peak at around 10 to 10.5 percent in the middle part of 2010.

The rise of charge-offs for the month went with a rise in the delinquency rate of nearly 5.8 percent. It should be noted that the increase this August was influenced by the rise in overdue balances in the last 30 to 60 days. Black further stated that “More increases should continue as back-to-school and holiday expenditures compete with credit card payments.”

Charge-offs is the annualized percentage of the total outstanding credit card balances that have already been written off as uncollected. It provides banks, consumers, and the public a gauge of what to expect in the coming months. Moody’s Credit Card Index relies on credit card information from 300 individual credit card-backed securities which covers around $410 billion in credit card receivables.

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Category: Credit, Credit Cards

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One Response

  1. [...] are also worried about the high unemployment rate and their losses as credit card charge offs increase. As they expect more troubles in real estate, they will continue to hold on to their [...]

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