Credit card late payments increase due to high gas prices

By Jeremy M. Simon

Late payments on credit card bills inched higher in spring 2006, when soaring energy prices hurt some consumers and made it tough to pay bills on time. 

In its quarterly survey of consumer loans, the American Bankers Association reported Sept. 27, 2006, that the percentage of credit card payments 30 or more days past due rose to 4.41 percent in the period from April to June from 4.40 percent in the January to March quarter.

The association's chief economist, James Chessen, explained that the combination of high gas prices and the Federal Reserve's interest rate hikes took a bite out of consumers' checkbooks, leaving Americans with less money for expenses, including repaying loans. 

Gasoline and other energy prices have since declined and the Federal Reserve has halted its campaign of rate hikes, with the Fed opting in the week of Sept. 17 for the second meeting in a row to leave rates unchanged.  That decision should help borrowers such as credit card users.

Looking forward, the Chessen predicted that consumers' situation should improve a bit in the third quarter as the central bank has taken a break from boosting interest rates and prices at the gas pump have fallen more than 17 percent since the end of June.

Still, he sounded a cautious note regarding home prices.  The housing market has cooled, making it tougher for consumers who may have been inclined to spend and borrow against their homes as values climbed over the past few years.  On Sept. 25, the National Association of Realtors reported that existing home prices on an annual basis fell in August for the first time in more than a decade.  

With less ability to treat their homes like virtual ATMs, the associations' Chessen warned that consumers will need to take additional care in managing their finances.  

Published: September 29, 2006

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