eightthirty
07-05-2006, 11:20 AM
Wednesday, July 05, 2006
Eileen Alt Powell
ASSOCIATED PRESS
http://www.dispatch.com/2006/07/05/20060705-Pc-D1-0900.jpg PAUL SAKUMA ASSOCIATED PRESS Rising gasoline prices are pressuring people already struggling with debt. Credit counselors say many consumers have tapped their homes’ equity and now lack the means to handle higher prices.
NEW YORK — Rising interest rates and higher gasoline prices are putting the squeeze on consumers’ budgets, and many are finding it harder to keep up with their bills.
Credit-counseling agencies say that consumers are coming in in droves seeking help.
"My phones are going crazy," said Howard Dvorkin, president of the nonprofit Consolidated Credit Counseling Services Inc. in Fort Lauderdale, Fla. "Consumers are carrying an exorbitant amount of debt, and they don’t have any savings to fall back on if things don’t go right."
An important measure of consumer financial distress, late payments on credit cards, ticked up in the first quarter, according to figures from the American Bankers Association. The Washington-based trade group said this week that the percentage of bank cards 30 or more days past due increased to 4.40 percent in the January-to-March quarter from 4.27 percent in the final quarter of 2005.
The Federal Reserve’s decision last week to raise short-term interest rates for the 17 th consecutive time again will boost borrowing costs for consumers, likely prompting more delinquencies on credit-card bills, auto loans and mortgages.
The slowing economy also is depressing income growth, so a greater percentage of takehome pay is going toward necessities and less is left over for debt payment.
Catherine Williams, a credit expert with Money Management International, a Houston-based financial-counseling and education agency, said rising costs for gasoline and utilities are only part of the explanation for rising creditcard delinquencies and increased consumer financial stress.
"People refinanced (their mortgages) six months or a year ago, so the ‘house bank’ is empty," Williams said. "Most can’t go back and tap their home equity again."
In addition, she said, consumers can juggle debt payments only for so long. As she put it: "You let the car payment go one month, then the house payment. Then you make a lot of little creditors happy for one month, maybe for two months. Then it becomes obvious that you have to catch up on car payments, and everything else slides."
Williams called that practice "a dangerous strategy" because consumers who let accounts become delinquent risk harming their credit ratings. A poor credit rating makes it harder for consumers to get loans and can force them to pay higher rates on the loans they do get.
Consolidated Credit’s Dvorkin pointed out that millions of Americans rushed to declare bankruptcy before the law change last fall made it harder for them to discharge unsecured debts. The high level of bankruptcy filings temporarily depressed the delinquency statistics and other measures of consumer financial distress, he said.
"Now we’re seeing a new crop of people starting to get into trouble," he said. "They can’t keep up. They’re the ones most affected by increased gas prices and higher rates."
He said juggling payments is one of the first indicators that a consumer is in trouble. He said other signs are:
• You make minimum payments month after month.
• You’re taking cash advances on one credit card to make the minimum payments on others.
• You delay or are late with important payments, such as the monthly mortgage.
• You put off necessary activities, such as doctors’ appointments.
SOURCE (http://www.columbusdispatch.com/)
Eileen Alt Powell
ASSOCIATED PRESS
http://www.dispatch.com/2006/07/05/20060705-Pc-D1-0900.jpg PAUL SAKUMA ASSOCIATED PRESS Rising gasoline prices are pressuring people already struggling with debt. Credit counselors say many consumers have tapped their homes’ equity and now lack the means to handle higher prices.
NEW YORK — Rising interest rates and higher gasoline prices are putting the squeeze on consumers’ budgets, and many are finding it harder to keep up with their bills.
Credit-counseling agencies say that consumers are coming in in droves seeking help.
"My phones are going crazy," said Howard Dvorkin, president of the nonprofit Consolidated Credit Counseling Services Inc. in Fort Lauderdale, Fla. "Consumers are carrying an exorbitant amount of debt, and they don’t have any savings to fall back on if things don’t go right."
An important measure of consumer financial distress, late payments on credit cards, ticked up in the first quarter, according to figures from the American Bankers Association. The Washington-based trade group said this week that the percentage of bank cards 30 or more days past due increased to 4.40 percent in the January-to-March quarter from 4.27 percent in the final quarter of 2005.
The Federal Reserve’s decision last week to raise short-term interest rates for the 17 th consecutive time again will boost borrowing costs for consumers, likely prompting more delinquencies on credit-card bills, auto loans and mortgages.
The slowing economy also is depressing income growth, so a greater percentage of takehome pay is going toward necessities and less is left over for debt payment.
Catherine Williams, a credit expert with Money Management International, a Houston-based financial-counseling and education agency, said rising costs for gasoline and utilities are only part of the explanation for rising creditcard delinquencies and increased consumer financial stress.
"People refinanced (their mortgages) six months or a year ago, so the ‘house bank’ is empty," Williams said. "Most can’t go back and tap their home equity again."
In addition, she said, consumers can juggle debt payments only for so long. As she put it: "You let the car payment go one month, then the house payment. Then you make a lot of little creditors happy for one month, maybe for two months. Then it becomes obvious that you have to catch up on car payments, and everything else slides."
Williams called that practice "a dangerous strategy" because consumers who let accounts become delinquent risk harming their credit ratings. A poor credit rating makes it harder for consumers to get loans and can force them to pay higher rates on the loans they do get.
Consolidated Credit’s Dvorkin pointed out that millions of Americans rushed to declare bankruptcy before the law change last fall made it harder for them to discharge unsecured debts. The high level of bankruptcy filings temporarily depressed the delinquency statistics and other measures of consumer financial distress, he said.
"Now we’re seeing a new crop of people starting to get into trouble," he said. "They can’t keep up. They’re the ones most affected by increased gas prices and higher rates."
He said juggling payments is one of the first indicators that a consumer is in trouble. He said other signs are:
• You make minimum payments month after month.
• You’re taking cash advances on one credit card to make the minimum payments on others.
• You delay or are late with important payments, such as the monthly mortgage.
• You put off necessary activities, such as doctors’ appointments.
SOURCE (http://www.columbusdispatch.com/)