Credit card charge-offs hit record high in January

[Joanne98]

Report says rate likely to continue to climb as economy suffers
By Jeremy M. Simon

Banks increasingly abandoned their attempts to collect money from delinquent credit cardholders in January, according to research and risk analysis firm Moody's.

Credit card charge-offs rose to a record high of 7.74 percent in January from 7.73 percent in December, with Moody's key credit card index predicting that the charge-off rate index could reach double digits by the end of 2009 if the employment picture worsens. Charge-offs occur when lenders conclude they are unable to collect a debt and remove it from their financial accounts. Last week, card issuer J.P. Morgan Chase warned that its net charge-offs could reach 7 percent for the first quarter as areas of the United States with the sharpest declines in housing prices and highest unemployment are hardest hit.

Meanwhile, Moody's said the rate of delinquency (credit card accounts that are more than 30 days past due) advanced to 5.94 percent in January, the highest level since the rate's historical peak of 6.31 percent in January 1992. Moody's said that record is likely to be broken in the coming months. Since delinquent accounts can eventually be charged off, the delinquency rate's movement is a solid indicator of future charge-off trends.

At the same time, the payment rate slid to 16.39 percent, down around 2.7 percentage points from the year earlier. The payment rate should continue to fall as cardholders who generally pay off their entire monthly balance spend less amid the recession and cardholders who only make minimum payments face increasing pressure to continue to do so, Moody's said.

http://www.creditcards.com/credit-card-news/moodys-reports-rising-charge-offs-in-january-1276.php

[ORDagnabbit]

1. money from thin air.... what happens if they dont pay the credit card off? nothing.

[barb162]

13. It goes on their credit rating and then if they need a loan, they look

like deadbeats. If anyone gives them a loan, it will probably be a much higher interest rate than they'd normally have. I'm sure it has a very major effect on credit ratings. Collection agencies may also get involved depending on the amounts due, I would imagine.

[JuniperLea]

2. Well, I suppose they could come after your house...

Wait... never mind:)

[wroberts189]

5. Can they? I do not understand ..

This is a very good question/thread ...what exactly can they do besides destroy your credit?

They take you to court ..get a summary judgment... but where does that go if you do not pay?

Lien on your house? How does that happen? And I am sure state laws are different.

[JuniperLea]

7. It would be different state to state...

But some of the rules are Federal. This is something very unique to each individual and would require a local professional, methinks. But the rules are changing daily... I don't think credit cards are under Obama's radar. I suspect they are soon to be called on the carpet.

[aquamarina]

8. Credit cards are unseccured which means that nothing is attached to it.

Unlike a mortgage that is secured by the actual home. If you don't pay the mortgage, they can take your house. If you have a car loan and you don't pay, they can take your car.

However, when you signed up for a credit card, you simply made a promise to pay it back at a specified interest rate - nothing more.

[JuniperLea]

9. They could still take you to court

And depending on the state, could go after you somehow. If that were not the case, why are people still paying those ridiculous rates? Why hasn't someone just said, hey, stop paying your bills... they can't do anything to you.

[marmar]

3. Fan, meet mierda.......

:scared:

[DJ13]

4. "We need ideas. Our delinquency rates are skyrocketing!"

"I know, lets raise interest rates on all our customers!"

"Brilliant!"

[wroberts189]

6. They turn the screws up on everyone thinking they will make more

...they just increase the delinquency rate instead.


Makes you wonder how these people got these executive jobs.

[skoalyman]

10. could debtor prisons come back in vogue?

;(

[xchrom]

11. i'm genuinely surprised the deliquency rate wasn't higher. nt

[RandySF]

12. Really?

I paid off my balance last week.