U.S. consumers are falling further behind on their credit card bills, setting the stage for record default rates, reports Fitch Ratings.

For the second consecutive month, credit card delinquencies breached all-time highs according to the latest Fitch Credit Card Index results. At the end of January, the 60-plus day delinquency rate was 4.04%.

“Record credit card delinquencies are just the latest sign that U.S. consumers are under considerable levels of stress,” said managing director and U.S. consumer asset-backed securities head Michael Dean. “The latest numbers point to even higher default rates and worsening consumer credit quality measures in the coming months.”

Credit card issuers typically charge off receivables after 180 days of delinquency or within 60 days of a bankruptcy filing, Fitch notes. Gross chargeoffs were 7.40% as of January, and are likely to rise significantly in the near term, the rating agency says.

“As the unemployment rate accelerates and consumers’ ability to service their debt weakens, Fitch anticipates that gross chargeoffs will surpass 8.5% by mid-year and approach 9% by year end,” said U.S. consumer ABS senior director, Cynthia Ullrich.

Despite the trends, Fitch anticipates downgrades will be limited in credit card ABS, particularly at the ‘AAA’ level given available credit enhancement levels and proactive efforts by issuers to stem the deterioration and preserve existing ratings.

IE