Ready for the next bailout? U.S. consumers are falling further behind on their credit card bills as the economy continues to unravel, setting the stage for record default rates going forward, according to Fitch Ratings.
For the second consecutive month, credit card delinquencies breached all-time highs according to the latest Fitch Credit Card Index results. At January month end, the 60-plus-day delinquency rate was 4.04%, up from 3.75% in the prior month. The index surged more than 23% in the fourth quarter of 2008 and is 30% above historical averages.
"Record credit card delinquencies are just the latest sign that U.S. consumers are under considerable levels of stress," said Managing Director and U.S. Consumer ABS head 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 receivables after 180 days of delinquency or within 60 days of a bankruptcy filing. This rise in delinquencies indicates that gross chargeoffs, at 7.40% as of January month-end, are likely to rise significantly in the near term.
"As the unemployment rate accelerates and consumers' ability to service their debt weakens, Fitch anticipates that gross chargeoffs will surpass 8.5% by mid-year and approach 9% by year end," said U.S. Consumer ABS Senior Director Cynthia Ullrich.
Fitch's Prime Credit Card Delinquency Index posted its second consecutive record high last month reaching 4.04% up from 3.75% in the prior month. The index has surged more than 23% in the last three months and the latest figures are 30% above historical averages. The index measures the percentage of credit card receivables that were reported more than 60 days past due through January.