A Reuters article yesterday shows that credit card defaults hit record levels in May. The rate of credit card losses was 9.4%. Delinquency rates were down, but of course they were down a large portion of them moved from delinquent to a default status
As unemployment keeps going up then delinquencies will keep going up. This is just another symptom of all the bad news that keeps popping up everywhere I look. If credit card defaults keep rising this will become another problem for the banks and their capital ratios the government is making them keep.
Most credit cards have variable rates. If interest rates go up that is going to make it harder for people to pay down balances also which could lead to more defaults. The big thing is that as defaults go up and the banks close these lines of credit. This is reducing a source of purchasing power for individuals which will make it harder for the economy to begin growing after we finally hit the bottom.
Also today China put in a buy China clause for its stimulus money. Weren’t they the ones complaining about the buy American provision in our stimulus bill?
