18 Apr Credit Card Charge-Offs Rise As Economy Falters – What To Do?
The charge off rate on credit cards in the U.S. rose to 5.59 percent in February, a rise of 24 percent from 4.51 percent in February 2007, and slightly above its long term average of 5.5 percent, according to the Structured Finance Group at Moody’s Inc.
A rise in card charge off rates usually is correlated to broad factors like unemployment and lags economic downturns, Moody’s reports. Therefore, Moody’s is predicting that charge offs could rise higher this year as the economic downturn continues.
The delinquency rate on cards came in at 4.53 percent in February, up from 3.89 percent a year ago. The rate, which measures the number of accounts more than 30 days late in payment, is at its highest level since March 2004.
What does this mean to you? It means that your credit card rates will undoubtedly rise as banks try vainly to prop up their own profit margins. Already battered by the subprime mortgage crisis, banks are scrambling for any possible way to keep the red ink from flowing too freely.
The solution? Cut up those credit cards and pay them off as quickly as possible. If your interest rate jumps on a card with an open balance, transfer it somewhere else immediately. And if you’re having problems handling your debts, better talk with a professional about turning around your own personal finances.
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