Fitch Ratings reported Friday that U.S. retail credit card chargeoffs are poised to surge in the coming months as more borrowers fall delinquent.
“Rising delinquencies will pressure card issuers and their retail partners during the coming year as Fitch expects a scenario akin to nearly one in eight cardholders defaulting on their store cards,” according to Fitch Managing Director Mike Dean.
According to the latest Fitch Retail Credit Card Index results, 60-plus day delinquencies have risen nearly 24% since August, reaching 4.8% in the most recent period.
Fitch expects chargeoffs to exceed 12 percent in first half of 2009 from current levels of 9.1%.
“While in line with historical averages, the current chargeoff index is more than 40% above 2007 levels. Similar to general purpose card chargeoffs, the comparison is somewhat overstated as results from the 2005-2007 era, were extremely favorable following passage of the Bankruptcy Reform Act,” according to the Fitch statement.
Fitch's Retail Credit Card index tracks more than $72 billion in principal receivables backing approximately $40 billion of retail or private label credit card asset backed securities. The largest issuers in the index are Citibank Omni Master Trust and GE Private Label Master Trust. Major retailers include Wal-Mart, Sears, Home Depot, Federated, Loews, J.C. Penny, The Limited Stores, Best Buy, Lane Bryant, and Dillard's among others.