Credit Card Losses Climb

A bad sign for any businesses relying on the U.S. consumer.

Capital One card loss rates hits 9.3%

Credit card loss rates have in the past closely tracked the rate of unemployment. But in this recession that relationship is breaking down. Economists say this is because job losses, which pushed unemployment rates to 8.5 per cent in March, have compounded other sources of financial distress such as the housing slump, stock market volatility, and the collapse of consumer confidence.

Capital One said its net charge-off rate for US cardholders – debts it believes it will never collect – rose to 9.33 per cent in March, up 1.27 percentage points in one month.

...US credit card charge-offs soared in February to 8.82 per cent, a record in the 20-year history of Moody’s credit card index. Moody’s predicts the charge-off rate will peak at about 10.5 per cent in the first half of 2010, assuming a peak in the unemployment rate of 10 per cent.

I don't know if they believe U.S. unemployment will peak for good at 10 percent, but the trend tells my gut that 10 percent is very optimistic.