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$1.02 trillion in June, data from the Federal Reserve show, 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.
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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 10 percent, banks wrote off more than $100 billion 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 $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.
* Bloomberg