The number of credit card defaults increased by over 11% in August

A report from Bloomberg said that defaults of credit cards in the United States rose by 11.49% in August. The number is up from the 10.52% it increased from the month of July. The percentage reflects complete write offs and not delinquencies that are still being sought by the banks and lenders.

Because of the rising unemployment, there is a problem with many people being able to pay down their debts or be able to pay their debts at all. With unemployment currently hovering just under 10%, 1 in 6 Americans are out of work.

The biggest lenders in the United States, JPMorgan Chase, Bank of America, as well as Citigroup all reported an increase in defaults for the month of August.

It is now predicted that unemployment may reach 10.5% sometime in mid-2010 and at the same time there will be an increase in write offs between 12 and 13%.

As an American, I am well aware of many people of the country having a dependency on credit. For the longest time, everything that was purchased was paid for with plastic (an no, I don’t mean debit cards). Delinquencies were bound to rise at some point in time and they were going to rise by a lot. After all, with all the people defaulting on their mortgages and going into foreclosure, why would they hold on to their credit cards and try to pay them off?

Credit card companies know that this is what is happening, which is the reason for why they all want to hike their interest rates. If they didn’t hike interest rates then how would they make up their money from all of the people who are defaulting on their loans? The government won’t be bailing out these companies anymore.