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Bad News For Capital One

It was a double whammy for Capital One today. While they were reporting a rise in credit card delinquencies, stock in Capital One Financial Corp, the parent company of credit card giant Capital One, saw their stock fall to $24.68 per share on the New York Stock Exchange. That equates to a 3.5% decline in share value. Actually it’s really no surprise that one would follow the other.

Credit defaults are once again the culprit. With rising unemployment and a deepening recession, consumers are feeling more and more pinched economically. Credit card issuers across the board have seen a sharp rise in delinquencies in the past 12 months alone. Card losses were reported to be even higher than what was originally forecast.

Credit defaults are when credit card issuers basically give up on recovering the outstanding balance from an account holder, while delinquencies represent card holders that are overdue in making their payments.

Capital One credit cards make up a full 75% of the publicly traded company’s business model so they are feeling particularly exposed as a corporation at the moment. It’s not only bad news for them, but for card holders that do the right thing as well. In order to recoup losses, many card issuers are raising interest rates and lowering limits on account holders that play by the rules and pay on time.

Related Information:

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