WASHINGTON — Americans are defaulting on their credit cards at the highest rate in nearly a year. Experts blame the improving economy: Consumers are feeling more confident in their overall financial situations and they’re loosening their purse strings because of it.
That confidence led to higher retail sales through the holiday season, but the credit card bills are coming due, and people are leaving them unpaid at an alarming rate, according to S&P and Experian. Another factor in the uptick in default rates is the increased willingness of financial institutions to extend credit to those who may struggle to pay it back.
Nationwide, the default rate was 0.91 percent in December; Chicago had the default index value of any U.S. city at 1.15.
A lot of the borrowers who are opening up lines of credit now are “subprime” — those with bad or limited credit history or low credit scores — noted Bruce McClary, spokesman for the National Foundation for Credit Counseling, an organization that provides access to financial counseling services.
“I don’t think we’re ready to sound the crisis alarm right now, but it’s certainly something that deserves our attention,” he said of the rising defaults.