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Capital One credit card defaults rise to 9.41% in May | The Commercial Finance Blog

Capital One credit card defaults rise to 9.41% in May

by LJ Miehe on June 15, 2009

Editor’s Note: Consumers are tapped out and they are using credit as a necessity not its traditional role as a luxury.  This is a sign of more distressed borrowers using credit without the ability to repay the debt and this is showing in higher default numbers.  Until we see job creation in the U.S. spurred, we are going to see more continued credit card defaults.

Capital One Financial Corp’s U.S. credit card defaults rose in May as unemployment increased and Americans struggled to pay their debts, the company said on Monday.  Defaults climbed even though the issuer of MasterCard and Visa credit cards changed its customer bankruptcy accounting and now is waiting longer to declare the debts of bankrupt customers uncollectible.

In a regulatory filing, Capital One said the annualized net charge-off rate for U.S. credit cards — debts the company believes it will never collect — rose to 9.41 percent in May from 8.56 percent in April.

The company said the accounting change had improved its charge-off rate by 50 basis points. Excluding the change, the rate would have been close to 10 percent.

Still, Capital One is performing better than bigger rivals American Express Co, Citigroup Inc. and Bank of America Corp, whose default rates already exceed 10 percent.  Capital One said credit cards at least 30 days delinquent — an indicator of future loan losses — fell for third straight month, to 4.90 percent in May from 5.04 percent in April.

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