Defaults of U.S. credit cards rose to a record in May

According to Standard & Poor`s, the U.S. credit quality index grew to 10 % from 9.4 % in April. In comparison with a year ago the index increased 66.8 %. Meanwhile, monthly payments more than 30 days late -- dropped to 5.7 % from 6.1 %, as the S&P index showed.

Besides, among private-label cards, defaults jumped to 12.2 % in May from 11.7 % in April, while delinquencies declined to 6.9 % from 7.1 %. The decline in delinquencies is ascribed to a seasonal trend, as consumers used tax refunds to pay back debts.

Credit card losses usually track unemployment, which grew to 9.4 % in May and is expected to top 10 % by the end of 2009 or in early 2010.

Michael Wray, Standard & Poor`s credit analyst, estimated that chargeoffs could accrue to between 10.5 and 12.5 % in the next 12 to 18 months, assuming unemployment raises to between 10.6 and 12.7 percent. While, the unemployment rate was at 9.5 percent in June.

According to analysts` estimates, loan losses in the sector could peak above $70 billion, while credit card losses across the industry surpass 10 % this year.

In addition, American Express Co, the largest U.S. credit card company by sales volume, and Citigroup Inc, the largest issuer of MasterCard branded credit cards, showed big credit card losses.

However, top Visa-branded credit card issuer JPMorgan Chase and Co, Discover Financial Services and Capital One Financial Corp, showed better than expected default rates.