Credit card companies delinquency rates and write offs are on the rise

Banks that issue credit cards should expect this part of their portfolios to see higher default rates. As the economy gets worse, people will lose jobs and prioritize the money they have left over to pay mortgage/rent, car loan, food, and utilities. Of course, if there is anything left after that, then it will go to pay down credit cards. That is where the problem begins for most in that there is nothing left after the essentials.

Right now credit card companies are cutting credit limits and increasing interest rates which is backfiring on them because the more difficult you make it for your customer to repay you back, then the easier it is for them not to pay. I think the rising rates below are reflective of that attitude.

CNBC:

Citigroup [C 3.48 -0.07 (-1.97%) ]—a big issuer of MasterCard cards—reported its annualized charge-off rate rose to 10.21 percent in April from 9.66 percent in March.

In addition, Wells Fargo [WFC 24.87 -0.82 (-3.19%) ]said its charge-off rate increased to 10.03 percent from 9.68 percent, while JPMorgan Chase[JPM 34.91 -0.63 (-1.77%) ]—a big issuer of Visa [V 65.07 0.55 (+0.85%) ]cards —reported its charge-off rate rose to 8.07 percent from 7.13 percent in the previous month.

Discover Financial Services,[DFS 8.59 -0.16 (-1.83%) ] the U.S. fourth-largest credit card network, said its default rate rose to 8.26 percent in April from 7.39 percent in March.

U.S. unemployment—currently at 8.9 percent—is expected to approach 10 percent as the country endures its worst recession since World War Two. Credit card losses are likely to follow that way.

If credit card losses across the industry top 10 percent, as some analysts and bank executives expect to happen later this year, loan losses could reach between $70 billion and $75 billion.

These losses are on top of their primary and secondary mortgage losses, commercial loan losses, student loan losses, auto loan losses and other miscellaneous loan losses.

I am still a true believer that there should be no bailouts for any of these companies which have already benefitted from taxpayer funds. They continue to fail and should not be allowed to receive any more bailout funds. Just say no to bailouts!