Moody's: Canada's Credit Card Bad Debt Rising

Moody's also says that the rate of bad debts on credit card in Canada "will increase in coming months." However, this increase will be at a slower pace than that displayed since the beginning of the year.

Andre Simard writes in today's Lapresseaffaires.com that this rate refers to the portion of loans that the credit card companies MasterCard and Visa say they are not able to recover. Therefore, they count them as losses, as bad credit card debt. The rate of bad debt write-off is a direct response to the high rate of unemployment. Also, it is related to the increase of requests of personal bankruptcies.

The unemployment in Canada is 8.7 percent. This was in august. Some analysts say it may reach to its pick of 9.6 percent in the second quarter of 2010. Understandably, the levels of bad credit card debts will possibly reach another high during that time. This is why Moody's said the rate will rise in the coming months, but at a slower rate.

Simard writes that at 4.8 percent the rate of credit card bad debt cancellation is is 60 percent higher over the rate of 3.07 percent a year ago. This is already 10th quarter in a row that this rate increases.

U.S. rate has reached 10.45 percent. It is 65 percent. In UK the rate is 8.71 percent, which has increased 33 percent from a year ago.

Prepared by Armen Hareyan
Materials from lapresseaffaires.com are used in this report.