Higher Gas Prices Lead To More Late Credit Payments on Debt

[gmsickofan]

Higher Gas Prices Lead To More Late Credit Payments
By Martin H. Bosworth
ConsumerAffairs.Com
September 28, 2005

The skyrocketing gas prices resulting from Hurricanes Katrina and Rita have already begun taking a toll on consumer finances. The American Bankers Association (ABA) reported today that delinquency rates on monthly credit card payments have reached record highs for the second quarter of the year.

According to the ABA's poll, credit card payment delinquencies rose to 4.81 percent of total accounts, up from 4.76 percent in the previous quarter. That was also an increase, from the original figure of 4.03 percent.

James Chessen, the ABA's chief economist, blamed higher gas prices for the increases in delinquency.

"Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations," he said.

In addition to tracking credit card loans, the ABA surveyed seven other types of loan categories, including home, auto, and personal. All categories showed increases in delinquency, with the exception of mobile home loan delinquencies, which fell from 4.46 percent to 3.74 percent.

Home equity lines of credit (HELOCs), normally posting the lowest rates of delinquency, also rose from 0.40 percent to 0.43 percent.

Gas prices have stayed high even though the damage from Hurricane Rita was less than predicted, leading many consumer groups, state attorney generals, and the FTC to warn against price gouging.

Consumers have even more pain to look forward to this fall, as the mandatory minimum payments on credit card balances are doubling. Though the long-term effect of the higher payments means consumers will get out of debt faster, it also means that consumers will have even less money to set aside for other expenses or savings.

http://www.consumeraffairs.com/news0...es_credit.html

[yoblues]

The credit bubble, which is what keeps the economy afloat is about to burst. The price of everything is rising far faster than wages and credit cards can keep up with. Lots of people are going to have to radically alter their lifestyle but they can also vote which means lots of political termoil ahead.

[TiburonJT]

Originally Posted by yoblues

The credit bubble, which is what keeps the economy afloat is about to burst. The price of everything is rising far faster than wages and credit cards can keep up with. Lots of people are going to have to radically alter their lifestyle but they can also vote which means lots of political termoil ahead.

Yep. Many people live beyond their means. After all, how can someone live without a huge TV and brand new loaded vehicle?

[lytmup]

Originally Posted by yoblues

The credit bubble, which is what keeps the economy afloat is about to burst. The price of everything is rising far faster than wages and credit cards can keep up with. Lots of people are going to have to radically alter their lifestyle but they can also vote which means lots of political termoil ahead.

I agree. This is what happens when people listen to Bush and Company and mirror their spending what they dont have philosophy.

[SSrevolution]

Well some people actually arent living beyond their means. Maybe they can't afford anything with the price of gas.

[jschira]

Originally Posted by gmsickofan

Higher Gas Prices Lead To More Late Credit Payments
By Martin H. Bosworth
ConsumerAffairs.Com
September 28, 2005

The skyrocketing gas prices resulting from Hurricanes Katrina and Rita have already begun taking a toll on consumer finances. The American Bankers Association (ABA) reported today that delinquency rates on monthly credit card payments have reached record highs for the second quarter of the year.

I may be mistaken here, but didn't Katrina and Rita happen in the 3rd quarter of 2005?

So how did they make peoples' payment late in the 2nd quarter of 2005?

[Family Man]

Thank you jschira. I was thinking exactly the same thing...

The group noted that the the average cost of filling up the gas tank of a mid-size car in June averaged $38.33, up from $30.63 at the end of last year. Today, the average is higher still, at $47.78.

"The last two quarters have not been pretty. Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations," ABA chief economist James Chessen said in a statement.

The average cost of a full tank of gas rose $8... Big deal. If people can't manage their money better to account for an $8 increase (and this increase did not happen overnight), the economy is going to be in REAL trouble when people have to renew their mortages at higher interest rates in the comings months.

[Aerodynamix]

I think he meant the 2nd quarter of 2005 as the 2nd consecutive 3 month period - not April, May, and June.

[saturnsteve]

Wow, that sucks. Money is tight all over for everyone!

[moman]

Just another scapegoat on which to blame poor fiscal policy.

I'm sure a lot of people making $35k are struggling to pay off a $250k mortgage and pay for two SUV's.

The thing I dislike is the new BK laws....they are coming into effect at exactly the wrong time.

[SSrevolution]

Originally Posted by saturnsteve

Wow, that sucks. Money is tight all over for everyone!

Yeah, even the oil companies! They are raising prices only to keep up with losses. (even though they have had huge profit increases)

[goblue]

Originally Posted by Family Man

the economy is going to be in REAL trouble when people have to renew their mortages at higher interest rates in the comings months.

This is what I worry about - energy prices busting the real estate market violently, rather than bursting the bubble by 5-10 years of flat returns. Many have said the home equity credit lines are what made the gas increases tolerable. Looks like we may be hitting that limit. Heating these large homes will also get very expensive.

Buying non-necessities on credit is really a mistake. Also, how many really have the 6 months of income in accessible savings for emergencies. Most economists recommend saving 15-20% of your pretax income. The actual amount - around 2%. That's a problem for all of us in the long term.

[yoblues]

YUP! Some where along the line people got convinced to live on credit for non necessities. I want that whatever right now, I don't have the cash, here is the credit card. I always lived below my income level during my working years because I put that 20% away for retirement. Now that I am retired I get to spend it because you can't take it with you when you go. However I still don't blow it foolishly.

[jschira]

Originally Posted by Aerodynamix

I think he meant the 2nd quarter of 2005 as the 2nd consecutive 3 month period - not April, May, and June.

I think that he wanted a catchy headline. What better than something that has "Katrina" or "Rita" in it.

Read here. Nothing about Katrina:

http://money.cnn.com/2005/09/28/pf/d...ex.htm?cnn=yes

[TimR]

If that is all it takes for people to screw up their finances...then we are ALL in trouble...

Tim