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More Consumers Fall Behind on Credit Card Payments

AP
Monday, 4 May 2009 | 12:10 PM ET

Consumers fell further behind on their credit card bills in March even as lenders worked to reduce their exposure to delinquency and default, a top credit bureau executive told Reuters.

Dann Adams, president of U.S. Information Systems for Equifax, said 4.7 percent of payments on bank-issued credit cards were at least 60 days late in March, an increase of 38.3 percent over March 2008.

Rising delinquency rates cause lenders to clamp down on credit.

In March, lenders closed 20 million card accounts, sending the total down by 58 million since the peak in July 2008 to 380 million.

They also issued fewer cards. The number of new bank-issued credit cards fell 38 percent in January and February from the same period in 2008. Equifax obtains this data after a one-month lag.

"If you're a lender and you're in the card business, you can't control unemployment," Adams said. "What you can control is credit lines. You can close existing accounts and pull back on the acquisition of new customers."

Credit card companies are sending out far fewer customer solicitations by mail these days, he added. "Consumers are getting constrained for credit."

The crunch comes as the job market remains extremely weak, which is causing even homeowners with prime credit scores of 620 or above, or prime homeowners, to fall behind on their mortgages in increasing numbers.

Of prime homeowners, 1.2 percent were 30 or more days behind on their home mortgage loans in March, up from 0.6 percent a year earlier and up from 1.1 percent the prior month.

"There are higher degrees of instability now in prime than in subprime," Adams said. "It's accelerated with the acceleration of unemployment."

Prime loans account for 84 percent of all mortgages.

The number of people staying on the benefits roll after drawing an initial week of jobless aid rose by 133,000 to 6.3 million in the week ended April 18, a record high, according to U.S. Labor Department data.

About 39.2 percent of homeowners with subprime credit scores of 619 or lower were 30 days or more behind on their home mortgage loans, up by 27.1 percent from last year.