September 28, 2005
Gas blamed for record late credit card payments
By Jonathan Stempel
NEW YORK (Reuters) - A record number of Americans delayed
making credit card payments in the second quarter as rising
gasoline prices made it tougher for many people to pay their
bills, a survey released on Wednesday shows.
card accounts 30 days or more past due rose to 4.81 percent
from 4.76 percent in the first quarter. The latter number was
revised upward from 4.03 percent.
"Gas is the driving factor," said James Chessen, the banker
group's chief economist, in an interview. "For those already
struggling to meet their financial obligations, it has been one
The data appear to contrast with a recent Federal Reserve
survey of the 100 largest U.S. banks, showing the consumer card
delinquency rate rising to just 3.7 percent from 3.68 percent,
a 10-year low.
"I'm not sure it's time to ring the alarm bells just yet,"
said Travis Plunkett, legislative director for the Consumer
Federation of America. "Over the last few years, especially
since (the) September 11, 2001 (attacks on the United States),
consumers have been more cautious in taking on new debt."
Chessen said delinquencies are unlikely to fall in the
third quarter because interest rates are still rising, and gas
prices have surged.
The impact of Hurricanes Katrina and Rita should begin to
be reflected in the fourth quarter, "but we don't know the
offsetting effects of insurance, disaster relief payments or
small business loans," he said.
The average price for regular unleaded gas was $2.215 a
gallon at the end of June, up 15 percent from a year earlier,
according to a survey of service stations by the Energy
Information Administration, part of the Department of Energy.
Gas prices this week averaged $2.803 a gallon, after
peaking at $3.069 on September 5, one week after Katrina struck
the Gulf Coast, the EIA said.
Chessen said personal savings rates were negative in the
second quarter, leaving many people without a buffer to absorb
higher gas prices.
He also noted that the Fed has tightened credit 11 straight
times since June 2004. This caused the prime rate, a benchmark
for many loans, to rise to 6.75 percent, a four-year high.
The ABA said that while the rate of delinquencies rose, the
dollar amount fell to a five-year low of 3.6 percent of loans
from 3.76 percent, suggesting that smaller borrowers are facing
"For banks, it means the risk levels haven't really
changed," Chessen said.
Bankruptcy law changes effective October 17 will make it
tougher for lower-income borrowers to have debts forgiven.
Among big card issuers, Bank of America Corp. said its
delinquency rate on managed loans rose to 4.25 percent from 4.2
percent in the first quarter. MBNA Corp., which Bank of America
is buying, said its rate fell to 3.98 percent from 4.17
percent. JPMorgan Chase & Co.'s delinquency rate fell to 3.34
percent from 3.54 percent.
The ABA survey also showed that delinquencies on a
composite of auto, personal and home equity loans rose to 2.22
percent from 2.03 percent in the first quarter.
Lower consumer confidence could drive borrowing down,
Plunkett said. The Conference Board on Tuesday said confidence
has fallen to its lowest since October 2003.
"Rising gas prices and interest rates could lead to higher
delinquencies, but (combined with) lower consumer confidence
could lead to households cutting back on spending, reducing
delinquencies," Plunkett said.
(Additional reporting by Tom Doggett in Washington, D.C.)