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Credit Card Default Rate Rising
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Credit Card Default Rate Rising

Economy

Credit Card Default Rate Rising

Credit Card Default Rate Rising
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Defaults on credit cards have soared to a record high. Bank of America, the nation's largest bank, says it does not expect to be paid back on more than 12 percent of its credit card loans.

RENEE MONTAGNE, host:

And here's something else that's rising, credit card defaults. They've soared to a record high. Bank of America, for one, says it doesn't expect to be paid back on more than 12 percent of its credit card loans. More from NPR's Wendy Kaufman.

WENDY KAUFMAN: Bank of America's credit card default rate reflects the nation's record high and rising unemployment rate. David Robertson is publisher of the Nilson Report which follows the credit and debit industry.

Mr. DAVID ROBERTSON (Publisher, Nilson Report): Every credit card issuer is in the same boat, quite frankly. And that is, as long as unemployment continues to be as troublesome as it is, credit card charge also are going to continue to rise.

KAUFMAN: At American Express, the default rate rose to 10.4 percent last month. At JP Morgan Chase, the figure was more than 8.3. High unemployment means many consumers cannot pay their credit card bills and some of those debts will become uncollectible. If there is any good news to be gleaned from the latest numbers, it may be this. At Capital One Financial, the default rate grew less than expected and the percentage of credit cards that were delinquent by 30 days or more actually fell for the third straight month. Dennis Moroney, a research director at TowerGroup says…

Mr. DENNIS MORONEY (Research Director, TowerGroup): And it would suggest that future losses would be lower, which would be encouraging. And I think that was the message they were trying to send.

KAUFMAN: On the other hand, he and other analysts say, it may be just part of the payment cycle. Historically, delinquencies have been lower in the spring than at other times of the year. In any case, losses by the credit card industry are expected to total as much as 80 to 90 billion dollars this year.

Wendy Kaufman, NPR News.

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