DEBT LEVELS AND DELINQUENCIES ON THE RISE
February 13, 2004
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People facing economic difficulties continue to be unsuccessful at paying off credit card debt and are watching their debt loads rise, according to studies from the American Bankers’ Association (ABA) and Myvesta.org, Collections and Credit Risk magazine reported.
Credit card delinquencies hit an all-time high in the third quarter of 2003, increasing to 4.09 percent of accounts in the third quarter from 4.04 percent in the second quarter, according to the ABA study. James Chessan, ABA chief economist, attributes the increase to the continued weakness of the job market, which has intensified financial stress for many Americans.
According to the survey conducted by Myvesta.org at the end of last year, the average credit card debt of their clients rose from $52,210 in 2002 to $77,036 in 2003. The survey also found, however, that some Americans actually have had success paying off debt. The average American is now carrying $2,294 in credit card debt, a 30 percent drop from $3,250 in 2002, according to the study.
But overall, the numbers show that delinquency problems continue. A study by New York investment bank Keefe, Bruyette and Woods Inc., points out that late stage card delinquencies actually jumped by 11 percent during the recent refinancing boom, suggesting that homeowners tapped into their home equity to maintain a lifestyle rather than pay down debts, according to the magazine. An end to the refinancing boom may translate to an end of the ability of some cardholders to pay, Collections and Credit Risk reported.
