Credit card defaults are tied to the unemployment rate. It’s a simple fact that when people don’t have jobs, they cannot pay their credit card bills. But just how high will America’s credit card default rise?
As of June 2009, Moody’s Credit Card Index was reporting a credit card default rate of 10.76%. In that same month, the national unemployment rate was reported to be 9.5%.
Things are expected to get worse in 2010, with the jobless rate projected to climb to 10.5% and credit card defaults reaching a record 12-13%.
While credit card defaults are at record highs, delinquencies hit their lowest point in June of 2009: 5.81%. Experts believe that was a reflection of consumers using their income tax returns to catch up on their credit card payments, as well as a generally cautious attitude toward spending. Some analysts believe the federal stimulus funds also helped.