Credit-card Defaults Less Likely to Rise

Here is some good news for consumers!

Aug. 31, 2009 08:31 AM Bloomberg News

Aug. 31 -- U.S. credit-card defaults are less likely to rise in the fourth quarter, as they typically do, as delinquencies stabilize and monthly payment rates improve, according to Fitch Ratings.

The economic situation may have caused some front loading of losses this year, analyst Cynthia Ullrich said today in a statement accompanying the release of Fitch's Prime Credit Card Charge-off Index.

Write-offs for loans deemed uncollectible fell to 10.55 percent in July after setting record highs for five straight months as consumer credit quality showed signs of life, Fitch said. Moody's Investors Service, which reported a similar decline on Aug. 20, said the trend may require the company to revise its forecast that charge-offs will peak at 12 percent to 13 percent in 2010.

Defaults, driven by unemployment and bankruptcies, have squeezed credit-card issuers profits. The U.S. jobless rate fell to 9.4 percent in July, the first decline since the recession began in December 2007.