US credit card delinquencies rise in sign of stress

WASHINGTON: US consumers are having increasing problems making credit card payments in another sign of economic stress, according to new banking industry data.

Fitch Ratings said in a report on Tuesday that credit card delinquencies hit a new record for the second straight month in January, with 4.04 per cent of consumers at least 60 days late.

"Record credit card delinquencies are just the latest sign that US consumers are under considerable levels of stress," said Fitch's Michael Dean.

"The latest numbers point to even higher default rates and worsening consumer credit quality measures in the coming months."

Credit card issuers typically charge off bad debt after 180 days of delinquency or within 60 days of a bankruptcy filing.

The rise in delinquencies indicates that chargeoffs, at 7.40 per cent as of January month end, are likely to rise significantly in the near term, according to Fitch.

"As the unemployment rate accelerates and consumers' ability to service their debt weakens, Fitch anticipates that gross chargeoffs will surpass 8.5 per cent by mid-year and approach 9.0 per cent by year end," said Fitch consumer analyst Cynthia Ullrich.

Some analysts say the problems in credit cards could deal another blow to a banking industry already reeling from the meltdown in real estate, and that the industry issued too many cards and too much credit to consumers unable to afford them.