Banks Ready to Absorb Defaulting Credit Cards Next

The banking industry

Banks are bracing for their next big hit—defaulting credit cards. The mortgage world has taken its toll on the banks. Bank of America CEO Ken Lewis already warned Congress that despite the billion-dollar bailout, banks will have an "awful year" because of the credit card industry.

Of almost $76 billion in credit card loans, almost $46 billion came from Bank of America, Citigroup and JPMorgan Chase. These large banks have all taken to using questionable tactics to futher mitigate their risk. Some credit cards companies have raised interest rates without notice. Some companies have increased their fees. The companies are using whatever they can to bring in revenue, in hopes of minimizing their loss.

Credit card charge-offs

At the end of last year, bank industry charge-offs, which are loans a bank has rendered uncollectable, reached a historic high of 7.73%. As the unemployment rate increases, analysts project this number to continue to increase along with it. "More people out of jobs, mean more people are going to default on their loans," states industry analyst Crane Barker. "History has shown us that the charge-off rate typically climbs to 1 point above the unemployment rate…and most people expect the unemployment rate to keep rising throughout 2009." ... click here to read the rest of the article titled " Banks Ready to Absorb Defaulting Credit Cards Next"