In January, late payments on credit cards hit a record high, according to Fitch Ratings. By year end, Fitch estimates that credit-card defaults, or balances that credit-card companies write off as uncollectible, will surpass the previous record of 7.7% recorded by the Federal Deposit Insurance Corp. in the first quarter of 2002, and approach 9%. Defaults hit a record low of 1.37% in the first quarter of 1984 and hovered well under 5% during the recent boom years, according to the FDIC.
And consider this report from February 27:
Moody's predicted the charge-off rate index could move into double digits by the end of this year if unemployment keeps rising. The government releases the February unemployment rate, which could touch 8%, next Friday.
The January delinquency rate, which forecasts the charge-off rate, climbed to 5.94%, the highest in 17 years. The record high of 6.31% in January 1992 is likely to be passed in the months ahead, Moody's said.
Meanwhile, payment rates, which have been falling since early 2007, are near a five-year low. In January, the principal payment rate fell to 16.39%, about 2.7 percentage points below the rate in January 2008.