We keep banging the drum about deteriorating commercial real estate being the spoiler for any economic recovery. But we also shouldn’t forget about credit card debt and rising delinquencies in that area. Earlier today, Moody’s said U.S. credit card delinquencies rose for a third consecutive month.
As Dow Jones Newswires reported earlier: “The delinquencies, which give a glimpse of credit-card issuers’ potential losses and how much they may need to set aside in reserves, rose to 6.12% in October from 5.97% in September and 5.79% in August, driven by increases in 60-day and 90-day delinquencies.
“So-called early stage delinquencies were little changed from September but up 11% from a year ago, Moody’s said. The credit rating company expects early stage delinquencies to creep up over the next several months.”
Going back a few years ago, when consumers were up to their eyeballs in mortgage debt, they made sure they could stay current or close to it on their credit cards because this little piece of plastic is what they were living off of – they chose to let mortgages default when the refinance game didn’t work anymore. The question is: how many of these people who are defaulting now on their credit cards already defaulted on their mortgages? A double whammy for the financial sector if that number is significant.