Could this be the new subprime crisis?

Tired of worrying about subprime mortgages? There's currently another timebomb ticking away within the US that has the potential to cause plenty more damage.

Tired of worrying about subprime mortgages? "Here's something new to consider": $900bn of US credit-card loans, says Martin Hutchinson on Breakingviews.com. Signs of stress are mounting. Unpaid balances rose at an annual rate of just 3.7% up to 2005; in the second quarter of this year, the rate was 8.4%.

Meanwhile, bond rating agency Moody's has reported that credit card companies wrote off 4.6% of payments as uncollectable between January and May, a 30% year-on-year increase. It's likely to get worse; according to Merrill Lynch's David Rosenberg, overall balances on credit cards jumped by an annual rate of 11% in May and June, showing that distressed homeowners are turning to their credit cards. "The lender of last resort as banks pull in their horns is the credit card." All this presages a jump in credit-card delinquencies over the next year. "The next shoe to drop" in this subprime mortgage fiasco "is probably going to be the credit-card business".

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