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Tuesday, December 15, 2009

Credit Card Charge-Offs Increase

by Calculated Risk on 12/15/2009 11:28:00 AM

From Reuters: Capital One, Discover credit-card charge-offs rise (ht shill)

Capital One Financial Corp (COF.N) and Discover Financial Services (DFS.N) reported that credit-card charge-offs rose in November -- a sign that consumers remain under stress.

In a regulatory filing on Tuesday, Capital One said the annualized net charge-off rate -- debts the company believes it will never collect -- for U.S. credit cards rose to 9.60 percent in November from 9.04 percent in October.

In another regulatory filing, Discover said its charge-off rate rose to 8.98 percent from 8.54 percent after two months of declines.
Capital One Credit Card Charge-Offs Click on graph for larger image in new window.

This graph shows the COF annualized credit card charge-off rate since January 2005.

Notice the spike in 2005 associated with a surge in bankruptcy filings ahead of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).

Capital One credit card charge-offs hit 9.83% in July (annualized) - above the peak in 2005 - and were near the peak again in November. It is likely that charge-offs will be above 10% soon.

Update: US Credit Card Charge-Offs Rise in November
JPMorgan Chase ... said charge-offs -- loans the company does not expect to be repaid -- rose to 8.81 percent in November from 8.02 percent in October.
...
Bank of America... said its charge-off rate fell for third straight month -- to 13.00 percent in November from 13.22 percent in October. However, it is still the credit card issuer with the highest default and delinquency rates.