Americans Falling Behind On Credit Card Payments Again

As a country, we were doing pretty well paying down our credit card debt for most of 2009, but according to Moody’s Investor Services, the number of people who are behind on their payments rose slightly in November.

The charge-off rate on U.S. credit cards, as measured by Moody’s Credit Card Index, rose to 10.56% last month after falling for the two previous months. October’s charge-off rate was 10.04%.

The charge-off rate measures those credit card account balances written off as uncollectable, as an annualized percentage of total outstanding principal balance. The record-high of 10.76% was reached in June.

The delinquency rate also rose, reaching 6.2% in November from 6.1% in October. That includes all credit card payments that are between 30 days and 180 days late, but have not yet been written off. This figured peaked at 6.4% reached in March.

With record unemployment, it seems like the delinquency rate would be higher. However, the total amount of delinquent balances in dollars, not as a percentage of consumers, is lower than this time last year. This could be a sign of better consumer behavior–or just an effect of lenders lowering borrowers’ credit limits.

Moody’s: November credit card payments slip [AP] (Thanks, Snarkysnake!)

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  1. henrygates3 says:

    Could the uptick also be a result of credit card companies changing their terms recently? A sudden jump in interest and lower limit could send people over their limits, bury them in fees, etc. It would send anyone on the edge right over it.

  2. Snarkysnake says:

    I have a feeling that a lot of consumers have been pushed over the financial edge by the skyrocketing upward adjustments that the big card issuers are making in interest rates since the card reform law was passed. They are repricing their product to effectively end the free ride that convenience users have enjoyed at the expense of the late payers,slow payers and out and out deadbeats.

    This is not to blame the law. It contains needed reforms. But the crushing weight of deadweight interest payments and a down economy could be part of the reason for this.

  3. dolemite says:

    This probably has to do with the fact credit card companies are rushing to ream customers before the new credit card rights go into effect. The past few months have been nothing but posts about how every major issuer has raised rates out of the blue 25-200%, moved payment due dates, decreased the payment window, decreased credit lines, etc.

  4. Mr. Kelly R. Flewin says:

    Could this be because tons of card companies have been ramping up the interest percentages and trapping folks in the Christmas Crunch? I mean seriously.. it’s evil, it’s vile.. and they know they’ll succeed because NO ONE wants to be responsible for ruining Christmas for their family. :(

    Bastards!

    • wcnghj says:

      If X-mas gifts are being put on credit cards and not being paid in full, maybe x-mas should have been cut back on.

      • dragonfire81 says:

        Tell that to most of the country.

      • Awesome McAwesomeness says:

        No kidding. I would say no gifts this year before I would put them on a credit card. We’d be feeding meals at a homelss shelter that day so my child could see what really doing without was like and would feel how blessed we are to have food, a roof over our heads, etc…

      • ElizabethD says:

        We must SPEND to save the economy!!! Whip out those Visa and Mastercards, those shiny green Amexes, and buy buy buy. Watch the national debt decrease, the Dow-Jones rise, and the jobless rate plummet!

        What? That’s not how it works?

  5. tbax929 says:

    I had mine all paid off…. then I lost my job. I didn’t use them a lot, but I am carrying a balance on one of them now, albeit fairly small. When I go back to work in a couple of weeks, I’ll be able to pay it back off again.

    While I think the new legislation has some to do with it, I know a few people who had to start using credit cards after being downsized from a job.

  6. Kaonashi says:

    The optimist in me says that this is just the result of people (irresponsibly in my opinion) putting all their Christmas purchases on credit and as people slowly pay that off along with their regular monthly credit card purchases it will go down.

    The pessimist in me says that this is people forgetting that they’ve already been bitten and going back to pet the proverbial dog again. It’s a cycle and as long as people don’t remember to be responsible with their purchases all the time it’s just going to keep happening.

  7. Esquire99 says:

    I suspect it’s due to both the jobless rate (people running out of savings, etc.) and perhaps to people trying to set aside money for Christmas, rather than spending it on CC payments.

  8. awer25 says:

    Uhh…yeah it’s shopping season!

  9. Awesome McAwesomeness says:

    Somehow, credit card omapanies manage to get payments from people who can’t even pay their electric bills and can hardly sfford food. Maybe it’s how they call neighbors and relatives to embarass you, tell you how you are scum of the earth and are going to jail, and other illegal tactics. That’s my guess asa to why the y get paid despite the floundering economy.

  10. axiomatic says:

    Are we sure its not the fee’s and penalty APR’s that are making the problem worse?

  11. thebigbluecheez says:

    I’m sorry to hear you’re out of work. I am, too, and it’s definitely not fun on several levels. It looks like we’re talking about balances that the card companies are writing off as uncollectable, though, instead of just balances.

    I talked with a guy who runs sales for a local motorcycle shop, and he mentioned that he’s defaulting on the cards he can’t afford to pay, and they’re offering him deals. I think his is more the situation the article is talking about: people who can’t (or won’t) pay their minimums or anything, which results in the card company (bank, etc) to write off a portion or all of that debt as lost.

  12. dg says:

    Duh, the Holiday’s and people buying lots of useless crap for everyone is what did that…

  13. ElizabethD says:

    Ooo, thanks, this just reminded me to pay my Kohl’s charge account balance online.

  14. u1itn0w2day says:

    I’ve been hearing for a while now that the credit card bubble would be the next bubble to burst.

    You have to remember there is probably alot of ‘old’ debt out there which included boom year prices. But now you now have post crash employment and wages. And if you tried to talk to some people about their credit habits 5 years ago you would have been considered a nay sayer. A pot of doom. Well it’s pouring now.

  15. humphrmi says:

    It should be noted that an increase in the charge-off rate does not mean that more, if not most, people are not paying off credit card debt. At 10.56%, that means that roughly 89% have not defaulted, and without more statistics, for all we know that 89% are paying down their balances (which would admittedly be a record, I think.)

    On the other hand, the delinquency rate rose, but it should be pointed out that that number is from November, probably before most people started spending (or not spending, perhaps) for the holidays. So, again, it’s entirely possible that people spent *less* in December because they were delinquent, which would mean at least not increasing our collective debt. Or, again, that remaining 94% who are not delinquent may have gone out and spent their limits in December. Who knows, without complete data.

    My point is, it doesn’t mean that we’re not still paying down debt.

  16. u1itn0w2day says:

    I wonder how these debt settlements affect the statistics.

    I heard when you try to settle your debt you wind up paying something less but still ‘ something’ on your entire bill. But to make the settlement negotiation work I hear stories of people being told not to pay so much as one penny on bill for 3-6 months at which one point the credit card company will be more likely to take as little as 25 cents on the dollar. I don’t like that strategy but I think it could be affecting alot of statistics including one’s credit score.

  17. Winteridge2 says:

    Come on, Americans! Help your economy and your President. Pay off those credit card balances, cut up the card, and buy only when you can afford to pay cash. A whole new concept!