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Credit card payments lag in February

Jeremy Hobson Feb 16, 2010
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Credit card payments lag in February

Jeremy Hobson Feb 16, 2010
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TEXT OF INTERVIEW

Steve Chiotakis: Capital One says the number of people having trouble paying their credit cards is up for the second straight month. Charge offs — the term used for the loans that the company doesn’t expect to be repaid — are up as well. Marketplace’s Jeremy Hobson is with us live from our New York bureau with more on that story. Good morning, Jeremy.

Jeremy Hobson: Good morning, Steve.

Chiotakis: So why the jump?

Hobson: Well, there is one overarching theme that hasn’t gone away, and that of course is unemployment. Obviously, if you don’t have a steady income, it’s hard to pay your credit card bill. And that’s often low on the totem poll of bills for people who are struggling. But I just spoke with Scott Hoyt, who is the senior director of consumer economics at Moody’s Economy.com. He says there’s a seasonal factor at play here as well.

Scott Hoyt: You do tend to get increases this time of year as people go out and spend for the holidays and then have trouble making payments. But we have generally seen a tendency towards moderating delinquencies.

And Steve, he says that’s in part because people are putting less money on their credit cards, either out of a new sense of responsibility or because they just can’t get cheap credit anymore.

Chiotakis: Yeah. And what about charge-offs Jeremy, or the loans that Capital One is basically writing off as losses?

Hobson: Right, well Capital One is reporting that figure is up now to 10.4 percent in January compared with 10.1 percent in December. Hoyt calls that number extraordinarily high, and he says charge-offs in general may get worse before they get better. Because it takes a while for a credit card company to give up on the possibility that they’ll ever get repaid.

Chiotakis: Hmm. All right, Marketplace’s Jeremy Hobson reporting from our New York bureau. Jeremy, thanks.

Hobson: Thank you.

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