In the News: Credit Card Defaults on the Rise

With losses from credit card defaults on the rise, an increasing number of U.S. banks are holding on to cash and lending to fewer consumers in order to protect against future card losses, according to some of the nation’s largest banks. An increase in the number of consumers unable to pay off their credit cards has put further pressure on banks already suffering from the mortgage crisis fallout. J.P. Morgan Chase said its card loans in default rose 45 percent in the third quarter compared to the same period in 2007. Capital One said it expects its default rates to rise by 7 percent in 2009. Over the past decade, credit card debt has risen by 10 percent while real wages and savings have remained stagnant, implying that Americans have been spending beyond their means and fueling the nation’s economic growth via borrowed money.

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