American Bankers Association: Credit card delinquencies fall in first-quarter 2004

Fewer people were past due on their credit card bills in the first quarter of 2004, according to the latest American Bankers Association Consumer Credit Delinquency Bulletin.

"After two quarters of record-high delinquencies, this may be the break in the clouds we've been looking for," said James Chessen, ABA's chief economist, in a June 29 news release.

Based on the number of credit card accounts, 4.21 percent (seasonally adjusted) were overdue in the first quarter after delinquencies reached an all-time high of 4.43 percent in the fourth quarter of 2003. Based on total dollars outstanding, bank card delinquencies decreased to 4.65 percent in the first quarter from 4.92 percent (not seasonally adjusted) in the previous quarter.

"Meanwhile, consumer payments on installment loans have been impressive during the past two quarters," Chessen said. "We are back to levels we have not seen in nearly a decade."

The composite ratio of closed-end installment loans 30 days or more past due decreased slightly to 1.86 percent from 1.89 percent of all accounts (seasonally adjusted). The composite ratio tracks eight closed-end consumer installment loans, including personal, auto and home equity.

Chessen noted that job and income growth in 2003 and early 2004 are now starting to pay dividends. More than 1 million jobs have been created since January, and financial obligations relative to disposable income improved.

"The improving economy has us hopeful, yet cautious. While job growth is much improved, high gas prices may continue to put consumers in a financial pinch," said Chessen, adding that if the Federal Reserve raises short-term interest rates by 25 basis points, the impact on consumers will be minimal. "The cost to consumers would be $2.50 more per year on $1,000 of debt less than the cost of a latte."

Personal loan delinquencies decreased to 2.48 percent from 2.68 percent. Late payments on direct auto loans decreased to 2.27 percent from 2.36 percent. Indirect auto loans increased slightly to 1.56 percent from 1.55 percent. Home equity loan delinquencies declined to 2.37 percent from 2.5 percent. Mobile home loan delinquencies increased to 5.93 percent from 5.56 percent.

Past-due payments on home equity lines of credit the lowest delinquency rate category decreased to 0.29 percent from 0.43 percent.

The ABA advises consumers to review their finances every year. ABA offers the following tips for consumers who might be having trouble paying down their debts.

Warning signs of being overextended on credit include:

paying only the minimum payment month after month;

being out of cash constantly;

being late on important payments, such as rent or mortgage;

taking longer and longer to pay off balances; and

borrowing from one lender to pay another.

ABA also has tips for solving debt problems.

talk with creditors hiding only makes the problem worse;

don't charge more purchases until your problems are solved;

avoid bankruptcy it's a short-term solution with long-term consequences.