Analysts are concerned that consumer credit card delinquency rates are rising in the US. Although delinquency rates are far behind levels seen during the 2008 financial crisis, it is a strong indication that lenders are at risk of increasing loan losses. The New York Federal Reserve is warning large US lenders that they need to pay attention to delinquency rates, or it could lead to trouble further down the line.
Household debt in the US is very high right now. Unemployment levels are low and with interest rates also low, many Americans are extending their credit commitments. However, there are clear indications that interest rates are creeping up, and with wages remaining static, many lower-income households could easily fall into debt.
Lenders Relax Lending Criteria
Major lenders have relaxed their lending criteria in recent times. In the wake of the financial crisis, subprime borrowers, those with a credit score below 660, had very little chance of finding a lender willing to offer them a credit card deal. But, nearly ten years later, banks are far more willing to offer credit cards to borrowers with low credit scores.
Credit card delinquencies are mainly in the subprime category of borrowers. What history tells us is that rising levels of serious delinquency in the sub-prime market, combined with rising interest rates and debt, is a toxic combination. If the US economy takes a downward dip, which it could in wake of the billions of dollars’ worth of damage caused by Hurricane Harvey and Hurricane Irma, families with high credit card debt could soon fall on hard times.
The good news is that you don’t need to end up in such a mess. With a bit of careful financial management, you can avoid falling behind on your credit card payments.
Do you have several credit cards with varying balances? If so, you are not alone. Millions of households hold multiple credit cards, with payments due at different times of the month. This makes managing personal finances far more difficult, so it’s hardly surprising that payments are missed.
Instead of juggling multiple cards, apply for a new credit card with an interest-free deal on balance transfers. Shift your outstanding debt onto the new card and cancel the old cards. You can pay off the balance, interest-free. Look for the best credit cards with interest-free deals.
Credit cards are useful personal finance tools, but only if you use them sensibly. Try to avoid spending on a credit card unless you can pay off the balance in full each month. It’s OK to have a credit card for emergencies, but if you are relying on a credit card to see you through until payday every month, something has to give.
Look at ways to reduce your monthly expenditure. There are bound to be some areas where you can save money, so create a budget and stick to it.
If all else fails and you are struggling to pay your debts, ask for help. Never ignore debt, as it won’t go away.