There were little to no signs of the end of the credit crisis on Main Street when credit card companies reported their card charge-offs today. Charge-offs, or loans the companies do not expect to be repaid on, remain very high on a month over month basis:
- JP Morgan charge-offs increased to 8.81% from 8.02%.
- Charge-offs at Capital One increased to 9.6% from 9.04%.
- Bank of America saw a slight decrease to 13% from 13.22%.
- Discover Financial saw an increase to 8.9% from 8.5%.
- American Express saw a slight decline to 7.6% from 7.8%.
Charge-offs tend to have a very high correlation with the unemployment rate. In addition, delinquencies appear to be stabilizing. This could be a sign that the problems in consumer credit are beginning to abate, but for now it’s clear that the credit crunch on Main Street isn’t over.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.