Credit card defaults reach record

05.18.09
By Sarah Beldo

Some of the largest credit card issuers in the country say more people are defaulting on their payments, according to new figures.

Reuters reports that the level of credit card defaults in the U.S. reached record highs last month, as more families struggled with unemployment and other effects of the recession.

Citigroup reported charge-offs increased during the month from 9.66 percent to 10.21 percent, while Wells Fargo also said its charge-off rate climbed into the double-digits to 10.03 percent.

American Express, JP Morgan Chase and Discover also reported a rise in defaults during April, according to the article.

These latest figures serve to highlight the problems that so many consumers are having with managing credit card debt, as financial pressures grow more acute.

Some consumer advocates say that issuers are making Americans' debt problems even worse by hiking interest rates and fees for customers who are already struggling to make payments.

At last week's town hall meeting in Rio Rancho, New Mexico, President Obama spoke in favor of credit card reform. He also urged people to be responsible with their spending behavior and avoid amassing excessive credit card debt.

"Americans know that they have a responsibility to live within their means and pay what they owe," he said during a recent radio address. "But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties and hidden fees that have become all too common."

Recently, Moody's Investors Service predicted that credit card charge-offs could grow to an unprecedented 12 percent over the next year, largely due to the troubled job market. 

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As financial pressures grow, consumers struggle to manage credit card debt.