Finance Globe

U.S. financial and economic topics from several finance writers.
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Bank Card Delinquencies Drop Second Quarter 2010

Consumers continue to get a better grip on their credit card and other debt in the second quarter of 2010, the American Bankers Association reported on Wednesday.

Delinquencies in bank credit cards decreased to the lowest level since the first quarter of 2001 at 3.62% of all accounts. Also, non-card revolving loans - which have the lowest delinquency rate of all loan types tracked by the ABA - fell to 1.21% in the second quarter.

The ABA defines a delinquency as an account that is 30 or more days past due. The ABA’s Consumer Credit Bulletin tracks eight closed-end, or installment loans, and three open-end loans on a quarterly basis.

The delinquency rate fell in five of the eight installment loan categories: auto loans, both direct and indirect; home equity loans; personal loans; and property improvement loans.

ABA Chief Economist James Chessen said there are two main reasons for the lower delinquency rate: banks write off loans in default so those accounts don’t count toward the delinquency rate, but also that consumers are “being prudent with their spending.”

"Consumers continue to focus on reducing debt levels, using credit cards less, and building savings," Chessen said. "This is very positive, but the fundamental story is the same: it's all about jobs. When people don't have jobs, they can't pay their bills. High numbers of unemployed workers and slow job growth continue to paint a picture of financial stress for many households," he added.

Mobile home, RV, and marine are the three loans types that continue to show an increased delinquency rate. Mobile home delinquencies rose to 4.01%, the highest delinquency rate of all the loan types tracked by the ABA.

"The economic momentum over the last few quarters seems to be losing steam. This will affect job creation and the ability of consumers to pay off debt," Chessen said. "I think delinquencies will continue to improve but at a slower pace, reflecting a struggling economy."

Consumers who have difficulty in paying their debts should talk to their creditors about it, the ABA suggests. “The sooner you talk to them, the more options you have.”

The ABA also says to avoid running up new debt until your problems are solved, avoid the long-term consequenses that come with bankruptcy, and finally, consider credit counseling if you can’t get ahead on your own.

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Thursday, 02 February 2023

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