Credit Card Holders Preparing for Unemployment Surge

Two bellwethers of American consumer sentiment signaled this week that the United States credit card industry hasn't seen the last of economic trouble. Credit rating agency Standard & Poor's released findings from its credit card index, which measures the quality of consumer lenders' debt portfolios. S&P's July numbers show that fewer Americans abandoned their credit card payments, with only 9.8% of cardholders slipping into default. In recent months, the figure had drifted as high as 10.4%

S&P analysts attribute the drop to a final wave of tax refunds, corporate bonuses, and severance payments. Estimating that unemployment could rise above 12%, the agency warned its subscribers to prepare for credit card default rates as high as 13% over the next two years. The alert coincides with a 38.1 score on the Consumer Reports Sentiment Index, the lowest score in nearly a year. Editors at the Consumers Union publication reported that respondents to its survey cited credit card finance charges and service fees as a major cause for distress.

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Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.