Too much easy credit, not enough income and scant capitalization have created yet another perfect storm.

From Reuters:

AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate — debts companies believe they will never be able to collect — rose to 8.70 percent in February from 8.30 percent in January.

The credit card company’s shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.

In addition, Citigroup Inc (C.N) — one of the largest issuers of MasterCard cards — disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.

“There is a continued deterioration. Trends in credit cards will get worse before they start getting better,” said Walter Todd, a portfolio manager at Greenwood Capital Associates.

How many of you have had the credit card companies cancel your accounts because you weren’t using your cards? I know I have, and usually they just send you a new card.

The game is changing, but, honestly, thank god for that. Credit shouldn’t be easy to get. People shouldn’t be allowed to easily fall into debt. That should be hard. Because our economy doesn’t grow in any credible way if people are overleveraged to the hilt and too much anymore we’re hearing that people carry an average credit card debt of $10K…which is crazy.

More as it develops…

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