Credit Card Woes Could Be Next Economic Brake

New York, NY, Nov. 3, 2008--Fitch Ratings said Monday that U.S. credit card portfolio losses will increase in the year ahead, with measures of credit continuing to deteriorate into 2009, and with some issuers surpassing historical loss peaks before 2009 is over.

"A turn in the cycle will be heavily dependent upon the duration of an economic downturn and the severity of the increase in the unemployment rate," it said. It cited rising job losses, volatile energy prices and the absence of refinancing options such as low-rate balance transfers and home equity loans.

Citigroup said that it lost $1.4 billion in the third quarter from credit card securitizations and that it expects such losses will continue, possibly reaching record levels in 2009.

The result compared to a gain of $169 million from credit card securitizations in the year-earlier period.

"Credit card losses may continue to rise well into 2009, and it is possible that the company's loss rates may exceed their historical peaks," the banking giant said in its filing with the Securities and Exchange Commission late Friday.