CHESSNOID

The numbers have not improved even though many analysts and experts have predicted the recession has ended or is about to end.  My guess is when the personal credit and charge card write offs increase that means people are living off credit cards till they can’t charge anymore.  Specifically, people who have lost their jobs or took a cut in pay, or households that have their overall incomes reduced from illnesses or whatever reason.

These rates of write offs are significant in that they reflect the economy at a household level.  The place where all those stimulus packages and wall street bailouts by both the Bush and Obama administration did not reach.

CNBC:

U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America’s lending portfolio, in another sign that consumers remain under severe stress.

Delinquency rates—an indicator of future credit losses—fell across the industry, but analysts said the decline was due to a seasonal trend, as consumers used tax refunds to pay back debts, and they expect delinquencies to go up again in coming months.

Bank of America—the largest U.S. bank—said its default rate, those loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.

In addition, American Express, which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized.

Credit card losses usually follow the trend of unemployment, which rose in May to a 26-year high of 9.4 percent and is expected to peak near 10 percent by the end of 2009.

If credit card losses across the industry surpass 10 percent this year, as analysts and bank executives expect, loan losses could top $70 billion.

Capital One said its credit card default rate rose to 9.41 percent from 8.56 percent, while Discover said its charge-off rate increased to 8.91 percent from 8.26 percent.

JPMorgan Chase—the second-largest U.S. bank and the biggest issuer of Visa-branded credit cards—said its default rate rose to 8.36 percent in May from 8.07 percent in April, but it still holds the best performance among the largest credit card companies.

In a final note on that article, the credit card companies are hurting themselves long term by killing the business that pays them.

Credit card lenders are trying to protect themselves by tightening credit limits, raising standards and closing accounts. They have also been slashing rewards, increasing interest rates and boosting fees to cushion against further losses.

I understand they don’t want to lose money, but they can’t make any money if they cancel everyone’s credit cards or reduce their limits to the balance owed. Another reason why people stop paying credit cards is that they can no longer use them. When you take that benefit away from them during tough times, those bills go down on the priority list of all the bills. Check out all the customers Amex cut off in the post below. It has hundreds of comments of people who have been on the receiving end of these tactics.

Recession is forcing American Express to reduce credit lines for no reason