US credit-card debt surpasses record set at brink of global financial crisis

A credit card with a chip is scanned in a credit card machine in the checkout area at a Wal-Mart Supercenter in New Jersey.
A credit card with a chip is scanned in a credit card machine in the checkout area at a Wal-Mart Supercenter in New Jersey. PHOTO: NYTIMES

NEW YORK (BLOOMBERG) - 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 (S$1.39 trillion) in June, data from the Federal Reserve show, as lenders including Citigroup 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 10 per cent, banks wrote off more than US$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 US$1 trillion 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.