As more homeowners are hit by the first wave of variable-rate mortgage hikes, they are turning to credit cards to fill in the financial gap between their monthly incomes and their monthly mortgage payments. Total American credit card debt has reached a whopping $915 billion. Banks and lenders should be fattening up from the interest on so much accumulated debt, but they’re actually feeling the squeeze, too. Why?
Delinquencies, defaults, and bankruptcies.
Credit card companies wrote off 4.58% in payments between January and May. That’s a third more than they wrote off in the same period last year. And banks are seeing their worst numbers since 2001. Citigroup’s third quarter earnings fell 57%. Bank of America and other major lenders anticipate at least an additional 20% in credit card losses over the next year.
Some reasons cited for the bankruptcies are falling home prices (which plunged 3.2% in the second quarter) coupled with soaring gasoline prices. Low- and middle-income workers who drive to their places of employment are the most likely group to have credit card delinquencies and defaults.
Delinquencies, defaults, and bankruptcies.
Credit card companies wrote off 4.58% in payments between January and May. That’s a third more than they wrote off in the same period last year. And banks are seeing their worst numbers since 2001. Citigroup’s third quarter earnings fell 57%. Bank of America and other major lenders anticipate at least an additional 20% in credit card losses over the next year.
Some reasons cited for the bankruptcies are falling home prices (which plunged 3.2% in the second quarter) coupled with soaring gasoline prices. Low- and middle-income workers who drive to their places of employment are the most likely group to have credit card delinquencies and defaults.
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