Credit Card Charge Offs Could Rise 35%

The charge off rate on prime credit cards could rise by 35 percent to finish the year at 7.00 percent, according to a the Credit Card Movers & Shakers report released yesterday by Fitch Ratings. 

Fitch reported that the charge off rate on prime rated credit card accounts in March was 5.73 percent, up 137 basis points from March 2007. The 60-day delinquency rate for prime accounts was 3.16 percent, up 47 basis points from a year ago.

The excess spread, or the yield minus major expenses, for prime accounts was an average of 7.56 percent for the three months ending in February. Fitch reports the excess spread has hovered near the 7.5 percent level since the second quarter of 2006.

The numbers for subprime credit card accounts were less positive, Fitch reported. The charge off rate for a subprime card account in March was 11.17 percent, up 244 basis points from March 2007. The subprime delinquency rate was 5.82 percent this March, compared with 5.27 percent a year ago. Fitch projected that the delinquencies will push charge offs to 13.00 percent in the next few months.

The excess spread for subprime card accounts averaged 6.77 percent for the three months ending in February, down 173 basis points from a similar three month average a year ago.

A portfolio of retail credit card accounts saw its charge offs rise to 8.01 percent in March, while delinquencies were at 4.00 percent, up 50 basis points from a year ago. The three month excess spread was 10.51 percent.