Wednesday, June 24, 2009

Report: Record Credit Card Charge-offs

by Calculated Risk on 6/24/2009 03:26:00 PM

From Reuters: US credit card chargeoffs break new record - Moody's

The U.S. monthly credit card chargeoff rate surpassed 10 percent and hit a sixth straight record high in May, Moody's Investors Services said on Wednesday ...

The chargeoff rate index -- which measures credit card loans the banks do not expect to be repaid -- rose to 10.62 percent in May from 9.97 percent in April.

"We expect the chargeoff rate index to continue to rise in the coming months but at a slower pace, as it peaks at around 12 percent in the second quarter of 2010," Moody's senior vice president William Black said in a statement.
Another month, another record.

I wouldn't be surprised if Chase sees an increase in chargeoffs after raising the monthly minimum payment from 2% to 5% for some credit card users.

As a reminder, the credit card indicative loss rates for the "more adverse" stress test scenario were 18% to 20% over two years. That might have been a little optimistic. The baseline scenario was 12% to 17% over two years - way too low.