Recession Hitting Consumers, Card Companies

   

Posted: Jun 2, 2009

The recession continues to take its toll on consumers and credit card companies alike, largely in the form of rising default rates.

A recent Associated Press report cites JPMorgan Chase CEO Jamie Dimon as saying that Chase expects losses on consumer credit cards to reach 9 percent in the next quarter, up from 6.86 percent in the first quarter. The report notes that this figure could rise even higher, depending on unemployment figures in the coming weeks.

Still, as equity analyst Matthew Warren told the AP, the company isn't in trouble, since its loss rates are consistent with the rest of the industry.

Elsewhere, a recent Bloomberg report notes that the industry's charge-off rate jumped 72 percent in one year to 9.01 percent. Charge-offs are loans that banks don't expect to see repaid, although consumers are still responsible for these debts.

Consumers who default generally see damage on their credit score for up to seven years. A rising unemployment rate strongly suggests that this number is likely to continue growing, possibly into next year.