It's clear that we are in the midst of a credit bubble that has burst. The fallout is being felt throughout the economy but is most prominent in credit card defaults, which are rising and will continue to rise, according the leading analysts.

Two of the biggest credit card issuers are getting clobbered. Bank of America (NYSE: BAC) saw its defaults rise to 14.54% in August from 13.81% in July. Citigroup (NYSE: C) saw defaults rise to 12.14% in August from 10.03% in July. Following close behind was JPMorgan Chase & Co. (NYSE: JPM) at 8.76%, up from 7.92%.

In the latest sign that the subprime disaster is not contained -- as Fed Chair Ben Bernanke and Treasury Secretary Hank Paulson have claimed -- Finfacts reports that U.S. credit card defaults are on the rise.

Credit card companies had to write off 4.58% of payments as uncollectable in the first half of 2007, almost 30% higher year-on-year. Late payments also rose, and the quarterly payment rate – a measure of cardholders' willingness and ability to repay their debt – fell for the first time in more than four years.

With the mortgage market melting down, consumers can't use home equity to lower their borrowing rate. Thus, consumers will need to borrow even more than the record $2.459 trillion -- up 6% -- that they took on as of June 2007. With consumers' incomes not keeping up with inflation and two-thirds of economic growth tied to consumer spending, the best hope for economic expansion is more consumer borrowing.