CHESSNOID

The banks are in a world of hurt. The banks have not recovered from the original housing bust in the sub prime market. There is a tsunami of more housing foreclosures on the horizon, commercial foreclosures are out of control,  and now the dreaded credit card delinquency rate continues to go up.

I have worked in the credit and collections department for banks and credit card companies in the past. I know right now to keep the rates under control, they are manipulating the books by offering everything under the sun to keep the accounts from being charged off. That is actually good for consumers.

Credit card holders when they are on time can only use the leverage of canceling the credit card and going somewhere else. Delinquent credit card holders have more leverage since they can continue not to pay which will hurt the credit card companies profits and increase their losses. Credit card companies will offer to waive fees, bring the card back to current status with a minimum 1 payment (even if you are 6 months late), reduce interest rates, and even settle for less than the balance if full.

Most people who fall behind on one credit card usually fall behind on all of their cards at the same time.  At this point bad credit is no longer an issue, so the better the offer the banks or credit card companies are, then the better their chances become at recovering part of the balance.

NEW YORK (Reuters) –

The U.S. credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody’s Investors Service said on Wednesday, in another sign consumers remain under stress.

The Moody’s credit card charge-off index — which measures credit card loans that banks do not expect to be repaid — rose to 11.49 percent in August from 10.52 percent in July.

The index resumed an upward trend after declining in July for the first time in almost a year, vanishing hopes of stabilization in the industry after record high credit losses.

“We continue to call for a recovery of the credit card sector to begin once industry average charge-offs peak in mid-2010 between 12 percent and 13 percent,” Moody’s said in a report.

Credit card losses usually follow the trend of unemployment, which rose in August to 9.7 percent, the highest level in 26 years. Moody’s estimated unemployment will peak next year at 10 percent to 10.5 percent.

The Moody’s index showed credit card delinquencies — payments more than 30 days late — rose to 5.80 percent in August from 5.73 percent in July.

The Obama administration has bailed out the banks, insurance companies, auto companies, and other wall street friends. Is it just a matter of time or delinquency rate when the banks and credit card companies ask for another tax payer bail out?