Credit card debt was a continued problem for consumers during the second quarter.
The American Bankers Association (ABA) reported that bank card delinquencies rose by 9 percentage points and now account for 1.73 percent of all card accounts, which is a record amount. James Chessen, chief economist for the ABA, noted that high unemployment was one of the major causes for the rise in delinquencies.
“Falling behind on debt payments is an unfortunate side effect of high unemployment and a frozen job market,” Chessen said.
People are cash-strapped and have been using credit cards to pay for household goods on a daily basis, according to counselors at the nonprofit Consolidated Credit. The experts worry that credit card charge offs will start to catch up with mortgage charge offs. The combination of job losses, wages not keeping up with inflation, increasing bankruptcies, and the housing crisis continues to make things difficult for Americans.
Chessen noted that until unemployment decreases and the economy improves, the outlook for credit delinquencies will continue to mirror recent trends. According to the Bureau of Labor Statistics, roughly 963,000 jobs were lost between the second and third quarters of this year, indicating the delinquencies could continue to be a problem.
Delinquencies in home equity loans also saw a record high for the second quarter. Home equity loans in delinquency increased 0.49 percentage points and account for a little more than 4 percent of all home equity loans.