Credit cards face bad debt

Steve Rhode — Wed, 29 Oct 2008 10:05:49 +0000

Consumer groups have long complained that credit card issuers push cards onto people who don’t need them or can’t afford them. They say that rising credit card defaults – just like mortgage defaults – are largely the fault of banks who lent to risky borrowers.

Innovest estimates that about 30 percent of Bank of America’s credit card loans are to subprime borrowers – second only to the failed Washington Mutual Inc., which had almost half of its credit card loans held by subprime borrowers.

Innovest also estimates that more than half of Bank of America’s credit cards are high-limit cards – second only to American Express Co. (Innovest classifies high-limit cards as those with lines of more than $10,000.) Nishikawa says that combination could prove toxic for Bank of America, which may have “lent more than (borrowers) can be expected to pay back.”

Bank of America’s charge-offs, or loans it doesn’t expect to collect on, increased to 6.14 percent of all credit card loans, or $1.24 billion, in the third quarter. That’s up from 4.61 percent the year before.

Credit cards face bad debt SunJournal.com, ME - 1 hour ago Asked in a recent TV interview if credit card debt would be "the next shoe to drop" for the banking industry, Lewis replied: "It, in some ways, already is," …

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Credit cards face bad debt

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