Credit Cards and Delinquencies- The Next Bubble to Burst
We are all experiencing the stagnant real estate market and the tightening mortgage markets. In some parts of the Chicago area, these conditions have hit us hard!
But is there another shoe to drop? The credit freeze and the turmoil over the last three weeks on Wall Street has hit many of those seeking auto loans and small business loans have been harder to come by and unsecured consumer loans tougher to find. Thousands, perhaps millions of Americans, are relying more on their credit cards to buy basic necessities. Many families have had to charge food and medical care to their mounting credits. A few others have used those 'free' credit card draw checks to pay recurring expenses — because they feel they MUST!
Credit overload?
Here's some sobering news: Credit card delinquencies may fuel the next big financial crisis. The Federal Reserve Bank of New York, in a study just released last week, found that while mortgage delinquency rates are up in 73 percent of counties across the nation, rates for delinquency of consumer credit cards is up just about as much. More than seven out of 10 counties across the country — 71 percent — report higher credit card delinquency rates compared to last year.
Review the interactive map from the Federal Reserve Bank of New York, which shows mortgage and consumer credit card delinquencies in nearly every county in the United States (2,838 of them). Shannon County in North Dakota tops the list with 11 percent of its Bank Card holders at least 60 days in arrears, and 17 percent of its mortgages at least 90 days delinquent. This county has one of the lowest per capita incomes in the U.S., hence, the exaggerated numbers here. Roughly 1,050 counties have consumer credit card delinquency rates at 2 percent or higher; seven showed near-zero delinquency percentages. Near-zero mortgage delinquency rates were seen in 127 counties, while 1,100 showed mortgage delinquencies of more than 2 percent.
The N.Y. Fed used Trans Union LLC trend data for its report. The data excludes the 10 percent least-populous counties across the U.S., as the potentially high percentages in these sparsely populated areas might skew the national figures.
Experts predict the rate of delinquency for mortgages and credit cards will likely continue to rise in 2009. As the economy weakens, and default rates increase, banks are likely to tighten their credit-granting standards even more as more jittery consumers lose their jobs, face stalled raises in income and may have more trouble paying their monthly credit card bills.
The problem is that many overextended consumers are in 'denial' that they have a problem, and often feel they have few choices to get by. They hope for a quick economic turnaround that no one is predicting.
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