New credit card data shows Americans still struggling

A recent report shows that credit card charge-offs have dropped a bit from their highs, but delinquencies -- that is, payments more than 30 days overdue - are still on the rise.

This article from MSNBC says that spells continuing trouble for Americans' personal finances and our nation's still-shaky economic recovery.

While the drop in charge-offs -- meaning that the issuer writes off the amount owed as a loss -- was attributed to people funneling tax refunds into their credit card debt, the high and still rising level of unemployment triggered the growth in delinquent payments.

An investment bank analyst cited in the article says this increase in delinquencies spells trouble for credit card companies, especially since economists say unemployment probably won't peak until sometime next year.

JP Morgan Chase and Capital One sustained the highest spike in delinquent accounts, although both of these companies saw slim decreases in the number of accounts they had to charge off in October. Bank of America also said its rate of charge-offs slowed slightly in October, although that figure still stands at a very high 13.2%.

Bank of America's charge-off rate is higher than the third-quarter industry average of 10.2%, although that figure's shocking enough all by itself.

For some perspective, the industry-wide charge-off rate for credit cards was only 3.1% in the first quarter of 2006, and it's never been as high as it is right now in the more than two decades of Federal Reserve data (the tables are here if you want to take a look).

Despite the bit of breathing room the lower default rate gives them, these companies are gearing up for a tough ride ahead. Late or delinquent payments are the canary in the coal mine; they're the first sign that a customer is struggling and might eventually declare bankruptcy, reach a settlement to pay only part of what is owed or otherwise not make good on their debt. Keep in mind, this comes on top of foreclosure and commercial real-estate losses.

The stock market's been picking up steam and bank stocks are on the rise these days, but stories and stats like this provide a sobering reminder that there are still very deep cracks in the American economy.
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