Credit Basics

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, D.C., based trade group said the percentage of bank cards 30 or more days past due increased to 4.40 percent in the January-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 17th consecutive time will boost yet again borrowing costs for consumers, likely prompting more delinquencies on credit card bills — as well as on auto loans and mortgages. The Federal Reserve's decision last week to raise short-term interest rates for the 17th consecutive time will boost yet again borrowing costs for consumers, likely prompting more delinquencies on credit card bills — as well as on auto loans and mortgages.

The slowing economy also is depressing income growth, so a greater percentage of take-home pay is going toward necessities and less is left over for debt payment.

Among the consumers who recently put a call into Dvorkin's counseling center was Andreia Marshall, an assistant project manager for a builder in Delray Beach, Fla.

Marshall said that after she broke up with her boyfriend, her paycheck wasn't big enough to cover her apartment rent, higher gasoline prices and other day-to-day expenses. Soon she started falling behind on her credit card bills.

Consolidated Credit's Dvorkin said 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 "leading indicators" that a consumer is in trouble. He added that other telltale signs are:

• You only 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.