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Credit card charge-off rates in November rose and cardholder payment rates slowed dramatically as the economic crisis worsened, according to Fitch Ratings' latest credit card industry report released this week. Moody's Investor Service reported equally gloomy news. Fitch said charge-offs on prime credit card portfolios reached 6.84% of outstanding receivables and predicted the percentage will increase to 8% this year as unemployment continues to rise. Cardholders also sharply cut their monthly payments, causing Fitch's monthly payment rate index to fall 246 basis points, to 15.96% from 18.42% in November, the largest one-month drop in Fitch's history. Retail card charge-offs soared to 10.51%, and Fitch expects the rate to reach 12% by mid-year. Separately, Moody's reported that its measurement of prime credit card charge-offs rose to 7.07% in November, its highest point since December 2005, when a change in bankruptcy law caused charge-offs to spike. With unemployment rates on the rise, Moody's expects charge-offs and delinquencies to continue their climb. Moody's predicts unemployment and prime credit card charge-offs both will peak at about 9% in early 2010. "The No. 1 driver of credit card charge-offs is unemployment, and there is nothing card issuers can do to dodge its effects," Will Black, Moody's senior vice president of asset finance, tells CardLine. To offset the negative effects of charge-offs on excess spread–a key measure of profitability for securitized card portfolios–Black says many issuers are increasing consumer card fees. Though new card-industry rules recently approved by the Federal Reserve will restrict certain cardholder rate and fee increases, those rules are not slated to take effect until July 2010, which is a boon to card issuers. "Many issuers have increased fees to broad swaths of consumers in recent months, and it's helping issuers cope in the short-term with the downturn," Black says.

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