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Credit Delinquencies Bring Leading US Banks to Knees
The news agency analyzed the financial statistics of the two big retailers Wal-Mart and Home Depot as well. They collected 325 million of accounts. This equals to nearly 45% of the total credit card debt of Americans, which is about $920 billion.
Bank of America is reported to have the largest delinquency - $5 billion. The bank's delinquency index increased by 200% last October. Bank of America is out for writing off $4.9 billion debts in the end of 2008.
A long-term delinquency increases in steady pace. GE Money Bank, HSBC Bank, for instance, have seen a 50% increase in debt with a 3-month delinquency.
Credit card delinquency cases growth is a side effect of the mortgage crisis, according to financial experts. "Debt eventually leaks into other areas, whether it starts with the mortgage and goes to credit card, or vice versa." - says Cliff Tan, a consulting professor and credit risk expert.
A Due to the increasing level of credit card delinquencies the defaults cases also become more and more frequent. Lenders just write off delinquent credit accounts with heavy debts.
According to Mark Zandy, the Chief Economist of Moody's, the main reasons for credit card delinquencies are the mortgage crisis and employment crisis in some areas of the US. California and Florida, for instance, are the areas suffering from mortgage crisis more than other states. This causes more delinquent and default credit card accounts.
However, not just these areas face serious financial problems. Banks limit home equity lines, food and gas prices keep rising. All this causes US credit consumers to turn to credit cards in order to win the struggle with mortgage payments and pay other bills. But with banks lowering credit card limits and raising rates and fees, more and more people fall behind their credit card payments.
Delinquent credit accounts make banks incur enormous losses and beg for change from other countries! America that used to be the largest creditor, turned out to be the biggest debtor now.
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