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RETAIL CREDIT CARD DEFAULTS AT RECORD LEVELS

Posted by: Darrell Castle
January 22, 2010
Topic: Bankruptcy

Fitch's December Retail Credit Card Index results show that more than one in every eight dollars of receivables was written off as uncollectable during the November collection period on an annualized basis. Fitch expects retail credit card defaults to continue elevated through the first half of 2010. "We do not foresee any meaningful improvement in the retail card credit quality in the coming months," said Managing Director Michael Dean. U.S. consumers are under pressure from many sources the most important of which is rising unemployment, and default rates reflect those pressures. Translation: people can't pay their credit card bills if they don't have jobs.

"Rising unemployment rates and intentional household deleveraging of debt will limit demand for credit in the near future. Consumer confidence remains low and again reflects the unemployment rate."Translation: people are out of work and don't want more debt, and being out of work and broke makes them pessimistic. "Households will remain cautious with their spending and further curtail their use of retail cards in 2010," Dean Said. Translation: people have finally stopped spending money they don't have on things they don't need.

"The latest Fed figures show revolving credit usage decreased at an annual rate of 18.5% in November-the largest dollar value drop since 1968 and the 14^th consecutive decline since October 2008. As long as the employment and income growth remain weak, demand for consumer credit, especially retail credit, will be limited." Translation: the credit created debt based economy is as dead as fried chicken and Dr. Frankenstein will not revive it until people go back to work.

Get out of debt as quickly as possible.