Losses Of Canadian Credit Card Firms Forecast To Hit $800 Million

February 4, 2009 4:12 p.m. EST

Toronto, Ontario (AHN) - A study by the Amex Bank of Canada projects credit card losses of Canadian credit card companies to reach $800 million in 2009.

Economic difficulties will cause more Canadian consumers to hold off paying their credit card bills, to be exacerbated by a rise in interest rates. Amex said beginning Feb. 11, interest rates on some American Express cards will go up 1 to 3 percent to 21.99 percent.

Deloitte & Touche partner Pat Daley said Canada is undergoing a similar experience what U.S. credit card holders are going through. "We're starting to see some indicators from a debt load point of view that credit card debt is becoming more of a problem for the issuers," Daley told the Toronto Star.

Indicators of this are the debt-to-disposable income ratio in Canada which has risen to 130 percent, beyond the level in the U.S., and value of all outstanding balances had gone up 40 percent in the past four years.

Meanwhile, credit card delinquencies rose from 5 to 10 percent in fall, which will translate into a 0.5 to 1 percent higher write-off rate, Daley said.