There is a growing fear in the markets that the damage from the mortgage markets may spread to consumer credit. Recently, a Goldman Sachs analyst suggested that credit card losses could reach $99 billion if worry spreads to the consumer credit markets. The concern stems from rises in both the charge-off and delinquency rates, which measure the share of balances that are uncollectable or more than 30 days late. HSBC alone noted that it had taken a $1.4 billion charge in its American consumer-finance businesses, partially due to weakness among credit card borrowers.

It may be a little too early to panic, however, as delinquency rates are still almost a full percentage point below the historical average at 3.98%. Industry reports also cite solid repayment rates and continued confidence on Wall Street in credit card backed securities. In fact, some analysts predict that issuance volumes for these securities will be up around 25% in 2007 alone. It is also worth noting that the credit card industry is not likely to experience a subprime-like meltdown because they are able to adjust interest rates and alter credit limits much easier than mortgage lenders.

So, what does this mean for credit card companies and consumers? Well, it is unlikely that the credit card industry will see a downturn like the mortgage markets. However, there is a risk that a sustained downturn if lower housing prices and contractions in credit continue to make for a dimmer future. This would equate to higher rates and less lenient terms for credit card consumers.