Jeanette A. Tucker | 10/28/2005 8:32:06 PM
Rising energy prices, low personal savings and the higher cost of borrowing are prompting unwanted mail for many consumers: Your bill is overdue!
Past due credit card bills reached 4.81 percent, an all-time high, during the April to June quarter reported by the American Bankers’ Association (ABA).
Unfortunately, this trend may grow in months ahead, according to LSU AgCenter family economics professor Dr. Jeanette Tucker. The ABA also noted an increase in delinquent payments on personal loans, auto loans, home equity loans and lines of credit.
The ABA cites rising gasoline prices as a key reason for the increase. Economists note that the average cost of filling up the gas tank of a mid-size car in June 2005 averaged $38.33, up from $30.63 at the end of last year. In late September, the average cost was higher still, at $47.78.
An obvious question is what will happen to delinquency numbers in the next few months, Tucker points out. Given that many hurricanes Katrina and Rita evacuees rely on credit cards to get through the initial stages of rebuilding their lives, credit card companies have agreed not to report evacuees’ delinquent payments to the credit bureaus for an indefinite period of time to preserve survivors’ credit standing.
Tucker adds that low savings and higher borrowing costs also are playing a role. The personal savings rate dipped to a record low of negative .06 in July. This suggests that consumers dipped into their savings to meet their living expenses.
The family economist says that failing to pay your bills on time can be challenging and damaging to your credit history. She lists several consequences:
• Late fees, which average $27.46, are likely to be imposed.
• The annual percentage rate (APR) on your account will likely be increased and will remain on your account for as long as your creditor chooses. These penalty rates average more than 24 percent, but can be as high as 30 percent.
• New "universal default" policies allow delinquencies on one card to trigger penalty rates on others, even if your payments are current on them.
• Your credit score will take a hit when the delinquency is reported to the credit reporting agencies. This will result in higher interest rates on any loans you may seek.
Tucker says if you have more bills than your monthly income can meet and are having a difficult time paying your bills on time, establish a debt-management plan. Follow these steps:
1. Determine whom you owe and how much you owe.
2. Avoid using your credit cards until you have a handle on your debt.
3. Determine how much you can pay back and when it can be paid.
4. Develop a plan for paying your debts.
5. Discuss your plan with your creditors.
6. Control spending by following your debt repayment plan until debt is repaid.
7. Pay at least the minimum owed on time every month.
8. Avoid using your credit cards until you have a handle on your debt.
9. Monitor your plan to see if you are keeping up with your debts and your daily living expenses. Adjust plan to address changes in income.
For information on related family economics topics, click on the links at the LSU AgCenter home page, at www.lsuagcenter.com. For local information and educational programs, contact an extension agent in your parish LSU AgCenter office.
On the Internet: LSU AgCenter: www.lsuagcenter.com/
Contact: Jeanette Tucker (225) 578-5398, or Jtucker@agcenter.lsu.edu