Credit Card Defaults Peaking Sooner

Credit card defaults may peak earlier than it was first expected, according to experts.

Recently consumers have increasingly failed to make repayments leading analysts to believe defaults on this kind of financial product could now rival those on mortgages.

However, a peak in credit card repayment defaults would not necessarily be a bad thing, as it would herald an improvement in the situation thereafter.

"We are cautiously optimistic that it (the peak in credit losses) is this year. The trends that we have seen seem to be pointing toward that," commented an analyst.

"You've seen some abatement on a weekly basis on the jobless claims and that's constructive."

Several big credit card firms have reported a better-than-forecast performance in the industry, while some investors are now saying the industry may re-enter the black next year.

Previously, it had been thought the credit card industry might not turn a corner until for a while, as consumers struggled to cope with mounting debt during the tough economic times.

A leading credit card company in particular has reported a turnaround in fortunes, with the number of failed repayments falling for the fifth month in  a row. However, this statistic could be misleading if following a sharp spike in delinquencies.

"While delinquencies came in worse than seasonality would suggest during the first four months of the year, May, June and now July have been better," said an analyst at a well know high street bank.

It is now expected that the average charge-off rate will be between 11 and 12 per cent, compared with previous estimates of up to 14 per cent.

If you are having difficulties paying your debts it is important to contact you lender as soon as possible and let them know about your situation. Most companies will have set procedures to follow which will either help you or put you in touch with debt management firms who can organise a payment plan.

If you would like to know more about credit cards why not ask AnswerBank Business and Finance.