US credit card debt sur­passes record set at brink of cri­sis

Muscat Daily - - BUSINESS -

New York, US - US con­sumer credit-card debt just passed an omi­nous mile­stone, beat­ing a record set just be­fore the global fi­nan­cial sys­tem al­most col­lapsed in 2008.

Out­stand­ing card loans reached US$1.02tn in June, data from the Fed­eral Re­serve showed, as lenders in­clud­ing Cit­i­group Inc and JPMor­gan Chase & Co com­pete to sign up card­hold­ers who may carry bal­ances - a rel­a­tively lu­cra­tive busi­ness in a pro­longed pe­riod of low in­ter­est rates.

The bet is that this time it won’t end so badly. In 2008, a drop in home prices spi­raled into a global fi­nan­cial melt­down, and af­ter the job­less rate surged to­ward ten per cent, banks wrote off more than US$100bn in credit-card loans over the next two years.

In­vestors have been skit­tish over the po­ten­tial for de­faults to rise ever since card bal­ances eclipsed US$1tn in February. Credit-card is­suers Cap­i­tal One Fi­nan­cial Corp, Syn­chrony Fi­nan­cial and Dis­cover Fi­nan­cial Ser­vices said write-off rates ticked up in the sec­ond quar­ter from the pre­vi­ous three months.

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