NEW YORK • Consumer credit card debt in the United States 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, according to data from the Federal Reserve, as lenders including Citigroup and JPMorgan Chase 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 spiralled into a global financial meltdown. After the jobless rate surged towards 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.