With the economy suffering and unemployment percentages reaching historically high double digits, it is naturally getting much harder for people to keep up with their bill paying, and that means a spike in credit card defaults and late payments.
According to recent industry research and statistics gathered from card companies, the rate of credit card defaults in the USA rose to record highs in 2009, in lock step with similarly high unemployment rates.
Bank of America, which is the nation’s biggest bank – and one of the top credit card issuers in the USA – reported that its own default rate jumped to more than 12 percent. That represented a climb of more than 10 percent when compared to the previous year, but in the prior year the employment picture across America was also more robust and rosy. Meanwhile American Express also saw double digit credit card default rates, a confirmation that as the impact of the recession hits home and more people get pink slips at work, the debt crisis at major credit card companies also worsens.
Other big lenders like Capital One, Discover, and JPMorgan Chase also noticed spikes in the volume of defaults, and the longer the unemployment rates stay within double digit territory the more industry observers say we should expect to see double digit defaults rates, too.
Of course these statistics do not take into account all the people who have made late payments, gone over their credit limit, or reverted to making only the bare minimum monthly payment instead of trying to actually pay off their credit card debts. But we do that in 2008 the average savings rates for American households fell into negative territory for the first time since the Great Depression. That means that people spend more than they saved, and that is always a recipe for debt crisis – regardless of what may be happening with the unemployment outlook.
To stop the flood of credit card defaults, in other words, the nation needs to create more jobs so that cardholders will have enough money coming in to make up the vast amounts going out in the form of expenses and debt repayment installments.
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