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Credit Cards News Tuesday 28th August 2007
Rise in US Credit Card defaultsThis year has seen a considerable rise in defaults by US consumers on credit card debts, significantly higher than those of last year. This raises fears that the current subprime mortgage market problems are spilling over into other areas of consumer finance.The first half of 2007 saw credit card companies write off 4.58% of payments as bad debt, up 30% for the same period last year. A rise in late payments was also observed and the quarterly payment rate fell for the first time in over 4 years. Analysts said that problems in the US mortgage market have dissuaded many individuals taking out refinance deals and using the equity locked up in their homes to pay off credit card debt. This is not to say that those defaulting on credit card payments are also defaulting on their subprime mortgages. Underwriting in the credit card market has been historically more robust than the mortgage sector and in some cases, hard pressed subprime borrowers may choose to default on mortgage payments rather than lose the ability to buy day to day goods on credit cards. Despite the losses the amount of debt written off as uncollectable remains well below the 6.29% seen in 2004. This figure was caused, in part by a change in US law that made the process of personal insolvency more arduous. Many individuals rushed to file for bankruptcy before the new legislation came in to effect. There has been a steady rise in personal insolvencies since 2005 and this, along with falling house prices, high energy bills and a loosening of the labour market are likely to continue to reduce consumer credit quality. Other Credit Cards Recent News and ArticlesSo Why Would I Want A Prepaid Credit Card? » Caution Over Credit Cards for Christmas » Important Things College Students Should Know About Credit Cards » |
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