Credit Commentary

U.S. credit card defaults rise to record in May

By Zarana on Wednesday, June 17 2009

With the series of releases of May Credit Card Trust data, U.S. credit card defaults rose to record highs in May signaling that consumers are still under pressure despite some signs of economic optimism.

Bank of America Corp’s saw the largest increase among major issuers, rising two percentage points from April. The default rate for Securitized accounts soared to 11.20 percent in May from 9.30 percent in April. The bank is paying the price of expanding rapidly in recent years and of holding one of the highest concentrations of subprime borrowers among the top card issuers, analysts said.
In addition, American Express Co, which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized. The credit card company also holds a large exposure in California and Florida, two of the state’s most affected by the foreclosure filings.
Citigroup master trust reported credit card charge offs rose to 10.20 percent in May from 9.70 percent in April. On the other hand, Discover Financial Services Master trust reported defaults rates grew less than expected, 5.4 percent in May from 5.3 percent in April.
Moreover, JPMorgan Chase & Co, the second-largest U.S. bank and the biggest issuer of Visa-branded credit cards, reported 10.0 percent default rate in May from 9.4 percent in April.
Delinquency rates fell across the industry, but analysts said the decline was due to a seasonal trend, as consumers used tax refunds to pay back debts, and they expect delinquencies to go up again in coming months.