Are credit card issuers partly to blame for soaring delinquencies?

Credit card delinquencies in the Fitch's Prime Credit Delinquency Index set a new record for the index in March, up to a rate of 4.04 more than 60 days late through January, an increase from the previous month's record of 3.75%. Since record keeping started in 1991 the index is 30% above historical averages. But since that history doesn't include recessions in the early 1970s and 1980s, the records probably aren't as dramatic as that sounds.

Some credit card companies are now reporting delinquencies as high as 7%, according to "Since credit card delinquencies are indirectly tied to unemployment, and unemployment numbers continue to rise, analysts are predicting that the charge-off rate could increase to as much as 9%-10%. Charge-offs are bad for both the issuer and the cardholder," said Bill Hardekopf, CEO of Based on data he compiled, here's some of the hardest hit credit card companies:

* In January, American Express reported that the annual net charge-off rate (a measure of credit default) rose to 8.29% in January, up from 7.23% in December. The rate for loans at least 30 days delinquent increased to 5.28% from 4.87%.

* Also in January, Capital One's annual net charge-off rate was 7.87%, up from 7.71% in December. The rate for loans at least 30 days delinquent increased to 5.02% from 4.78%.

* Chase warned that net charge-offs could reach 7% for the first quarter.Fitch Ratings anticipates charge-offs will be more than 8% in the coming months and possibly 9% during the second-half of 2009. "To reduce their risk of failed loans, credit card issuers have become cautious lenders. They have tightened lending requirements and require higher credit scores. Some issuers are increasing interest rates, accepting fewer applications, lowering credit limits, and closing inactive accounts. Some are even trying to buy out some or their accounts which are at the highest risk of default," Hardekopf said.

But, are these restrictions helping to drive up the number of delinquencies? I think the answer is a resounding yes, and Bill Hardekopf agrees, "The issuers themselves are partly responsible for increasing the number of credit card delinquencies. Issuers have made it a practice of raising rates on their highest risk customers, sometimes to the default rate which can be anywhere from 28% to 32%. In this economic climate, it is not uncommon for consumers to see a significant increase in the APR if they miss a payment or are even late on a payment. There are some issuers that will take your APR to the default rate for exceeding your credit limit twice within a 12-month period. Sometimes, the interest rate is raised not because of something the cardholder did, but because of market conditions. Some of these practices penalize the people who are already struggling with debt and these changes may be the straw that breaks their back."

Even people with top credit scores are seeing their interest rates jacked up to a point they can't afford to pay just because a payment got delayed by the post office. People who never had a late payment, see their rates increased as high as 24%. If you have a history of payment problems rates could go above 30%. If one late payment is reported on one card, all your other credit cards may jack up their rates as well.

Given these drastic moves by the credit card companies, does it surprise anyone that by raising rates to what appear to be usury charges, people just give up trying to make payments on debts that they will likely never be able to pay off? I'm not. Are you?

Lita Epstein has written more than 25 books including the "Complete Idiot's Guide to Improving Your Credit Score."
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