According to a Reuter’s story, U.S. credit card defaults continued their rise in April, with both Citi and Wells Fargo reporting double digit credit card loss rates.
Citi led the default pack with its charge-off rate reaching 10.21%. Wells Fargo came in a close second, with a 10.03% charge-off rate. Other large issuers, including Chase and Discover, reported default rates in the low 8% range, slightly below the current 8.9% unemployment rate.
While this is obviously bad news for the banks, it is really bad news for consumers. As credit card companies try to cope with excessive loan losses, credit availability may decrease even more than currently depressed levels.
Additionally, consumers looking for 0% credit cards are likely to find these offers more difficult to come by. By now, you’ve probably noticed the absence of these offers in your mailbox. Soon, they may no longer be available online. As we’ve reported here, a number of companies have reduced 0% introductory periods substantially, with most companies now offering 0% rates that only last for 6 months, half the 12 month average 0% period of just a few months ago.
One particular concern to Smart Balance Transfers is a decrease in the length of 0% rates and the increase in fees related to balance transfer credit cards. Bank of America will be raising balance transfer fees to 4% in June, while certain Discover credit cards are already charging this fee.
Ultimately, consumers who have yet to take advantage of a 0% APR balance transfer to reduce their debt are likely to stuck paying higher interest rates for the foreseeable future as banks become more and more reluctant to lend money in general, let alone with no interest.
Unfortunately, there really is no light at the end of the tunnel here. The credit card landscape continues to change dramatically with each change more and more unfavorable to consumers.
Sources: http://www.reuters.com/article/GCA-Economy/idUSTRE54E4Y020090515
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