Rising Defaults on Credit Card Bills

Rising Defaults on Credit Card Bills

from The Big Picture by ritholtz

This can't be good:
<BLOCKQUOTE>
"US consumers are defaulting on credit card payments at a significantly higher rate than last year, raising the prospect of problems in the stricken US subprime mortgage market spreading to other types of consumer debt.
Credit card companies were forced to write off 4.58 per cent of payments as uncollectable in the first half of 2007, almost 30 per cent higher year-on-year. Late payments also rose, and the quarterly payment rate - a measure of cardholders' willingness and ability to repay their debt - fell for the first time in more than four years."</BLOCKQUOTE>
I suspect that there is a big swath of folks who can no longer refi their homes . . . So after their rates reset 300 bips or so, they take cash advances to pay the mortgage -- then default on the Credit card debt, rather than the mortgage.
However, as FT notes:
<BLOCKQUOTE>
"But it is not clear that the borrowers defaulting on their credit cards are the same people defaulting on their subprime mortgages, it added. This is in part because underwriting standards in the credit card sector have been more robust than in the mortgage industry.Also, many highly leveraged subprime borrowers, with little or no equity in their homes, may choose to default on a mortgage before losing their credit cards."</BLOCKQUOTE>
Let me see if I can dig up a chart on this to put it into some perspective . . .
>
Source:
Defaults on credit card bills in US rising
Saskia Scholtes
FT, August 28 2007 03:00
http://www.ft.com/cms/s/0/f37a80c6-54fe-11dc-890c-0000779fd2ac.html