Charge-off rates for credit card loans

A reader recently commented that he'd heard that the charge-off rates (the fraction that banks write off as bad debt) for credit card loans are typically around 4 percent, but hadn't seen a reference to that fact. Here’s a graph of the data from the Federal Reserve that shows the charge-off rates on credit card loans since 1985. Until recently, the rate hovered around 4 percent. It’s jumped to roughly 10 percent in the past year or two, but I’d expect it to go back down to about 4 percent again in the next year or two.