Credit Cards Online Information

(Standard & Poor's)--U.S. credit card losses have not come back down after the 2001 recession and could go much higher if the economy slides back, according to a commentary released recently by Standard & Poor's Ratings Services. Moreover, the Iraq war has consumers and their lenders nervous and, in the near term, the war could send oil prices up while further terror attacks on the U.S. could damage consumer confidence. According to the report, titled "War Woes for U.S. Credit Cards," consumer spending has recovered from its post-Sept. 11, 2001 drop, but employment is down sharply and the only real driver for the economy is federal spending. The economy has lost two million jobs since early 2001, which should also inhibit consumer spending, the article said.

"With the unemployment rate still creeping higher, charge-offs are likely to rise further before finally falling later next year," said David Wyss, Standard & Poor's Chief Economist and co-author of the commentary. "March may remain the monthly peak because of the concentration of losses, but charge-offs will remain above 7% in early 2003. Losses will then gradually slide back below 7%." Consumer confidence fell to a new nine-year low in February, the report says. The fear of war, weak stock prices, and two years of falling employment have scared consumers. Moreover, consumers cannot spend much more than they already do. During the 1990s, the stock market was doing the saving for them. This was especially true of baby-boomers approaching retirement. Suddenly, those retirement funds look much less lush and early retirements are being postponed. With the unemployment rate rising above 7%, the pressure on personal finances would push the charge-off rates to new highs (above 8%) this year, according to the report. As the war winds down and oil prices revert to normal, the economy will rebound, easing pressure on consumer finances in 2004 and 2005.

The article "War Woes for U.S. Credit Cards" is available on RatingsDirect, Standard & Poor's Web-based credit analysis system. The article is also available on Standard & Poor's Web site at http://www2.standardandpoors.com. Go to "Fixed Income," under "Browse by Sector" choose "Structured Finance" and, under Commentary & News, click on "More" and scroll down to the desired article, dated April 10.

Standard & Poor's, a division of The McGraw-Hill Companies, provides widely recognized financial data, analytical research and investment and credit opinions to the global capital markets. With more than 5,000 employees located in 19 countries, Standard & Poor's is an integral part of the global financial infrastructure.

# posted by Medical Information : 3:27 AM