Credit card defaults alarmingly high
CNN Money, December 23rd, 2007
Americans are falling behind on their credit card payments at an
alarming rate, sending delinquencies and defaults surging by
double-digit percentages in the last year and prompting warnings of
worse to come.
An Associated Press analysis of financial data
from the country's largest card issuers also found that the greatest
rise was among accounts more than 90 days in arrears.
Experts say
these signs of the deterioration of finances of many households are
partly a byproduct of the subprime mortgage crisis and could spell more
trouble ahead for an already sputtering economy.
"Debt eventually
leaks into other areas, whether it starts with the mortgage and goes to
the credit card or vice versa," said Cliff Tan, a visiting scholar at
Stanford University and an expert on credit risk. "We're starting to
see leaks now."
The value of credit card accounts at least 30
days late jumped 26 percent to $17.3 billion in October from a year
earlier at 17 large credit card trusts examined by the AP. That
represented more than 4 percent of the total outstanding principal
balances owed to the trusts on credit cards that were issued by banks
such as Bank of America (BAC, Fortune 500) and Capital One (COF, Fortune 500) and for retailers like Home Depot (HD, Fortune 500) and Wal-Mart (WMT, Fortune 500).
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