More people were past due on their credit card bills in the second quarter of 2001, according to the American Bankers Association’s latest Consumer Credit Delinquency Bulletin.
Based on the number of credit card accounts, 3.93 percent were overdue, up from 2.99 percent in the previous quarter and also 2.99 percent a year earlier (second quarter 2000). Based on total dollars outstanding, second quarter credit card delinquencies were 4.13 percent (not seasonally adjusted), the same as the previous quarter’s 4.13 percent but higher than 3.54 percent in the same period last year.
‘We’re seeing the effects a stagnant economy and increased layoffs can have on consumer finances,’ said James Chessen, ABA chief economist. ‘While lower interest rates have helped some consumers refinance their debt, it’s clear that refinancing cannot solve all consumers’ financial problems.’
‘Credit cards can be like spare tires in emergencies but are not meant to carry heavy loads over the long haul,’ said Chessen. ‘Consumers should contact their creditors at the first signs of stress to prevent a financial breakdown.’ ‘Credit in the system remains ample, though banks continue to review their lending standards in light of the economic slowdown,’ said Chessen. ‘The strong financial positions of banks provide secure footing for continued lending even as the economy slows.’
The number of delinquent accounts for ABA’s composite ratio of closed-end installment loans rose to 2.51 percent of all accounts from 2.40 percent in the first quarter of 2001. The ratio-which tracks eight types of closed-end consumer installment loans, including auto, home equity and personal loans-is higher than it was a year earlier (2.30 percent in the second quarter of 2000). A loan payment is considered delinquent when it is 30 days or more overdue. Direct auto loan delinquencies increased to 2.52 percent in the second quarter of 2001 from 2.26 in the first quarter. Delinquencies for indirect auto loans increased to 2.60 percent from 2.47 percent in the first quarter of 2001. On a more positive note, delinquencies on home equity loans (based on the number of accounts) decreased from 1.32 percent to 1.18 percent in the second quarter. Late payments on home equity lines of credit also decreased, from 0.76 percent to 0.64 percent. Home equity numbers are not seasonally adjusted. Home equity lines continue to be the loan category with the lowest delinquencies.
The ABA advises consumers to review their finances every year. The ABA offers the following tips for consumers who might be having trouble paying down their debts. Warning signs of being overextended on credit:
Â· Paying only the minimum payment month after month;
Â· Being out of cash constantly;
Â· Being late on important payments, such as rent or mortgage;
Â· Taking longer and longer to pay off balances;
Â· Borrowing from one lender to pay another.
Solving debt problems:
Â· Talk with creditors – hiding only makes the problem worse;
Â· Don’t charge more purchases until your problems are solved;
Â· Avoid bankruptcy – it’s a short-term solution with long-term consequences;
Â· Contact Consumer Credit Counseling Services at 800-388-2227.