by Joseph Kenny | 07/30/09

If you look at the recently released default statistics that were issued by credit card companies, you may have a better idea why consumers are seeing increases in interest rates and lower credit limits.

For Bank of American, the nation's largest bank, this report showed its default rate at 13.8% in June, an increase from 12.5% in May. The defaults, or charge-offs, are those debts that the lender decides are uncollectible.

Focusing on Bank of America, you must understand how terrible a loss nearly 14% of its credit card loans would be. It should be clear why the bank has decided to raise rates, by changing from fixed to variable rates on different credit cards as well as hiking their balance transfer fees. The company cannot continue losing money without finding new revenue to compensate for the losses.

Collectively, banks across the country are looking billions of dollars because of the heavy toll that charge-offs and defaults are taking on the spirally credit card industry. Some analysts expect the default rate to rise even more as unemployment rates continue to grow.

Damage has been done by both sides in this struggle, both cardholders and the industry itself. There is plenty of anger and resentment on the part of cardholders for the increases in rates and fees, but, of course, the same is true for the card issuers who are losing their profitability. With the prospect of new credit card regulations taking effect and the increases in unemployment across the country, there may not be an easy solution to this dilemma.

With the release of reports detailing the default rates of various banks and issuers, there are may be signs that the default rates might be stabilizing since many remained about the same as the last report.

Here are some of the default rates for other major credit card issuers:

Capital One's rate increased to 9.73% in June from 9.41% in May.

JP Morgan Chase defaults were reduced to 8.04% in June from 8.36% in May.

Discover's rate dropped to 8.75% from 8.91%.

American Express defaults fell slightly from 10.0% in May to 9.9% in June.

Citigroup defaults remained unchanged at 10.5%

As it is clear that the unemployment is very likely to continue rising, observers have suggested that credit card default rates may increase to 12% or above by the first quarter of 2010.