The combination of a shrinking economy, high unemployment, and a deteriorating housing market, are pushing strapped U.S. borrowers over the edge. According to a report published Tuesday by the American Bankers Association [ABA], delinquencies on the value of all card debt spiked to a record 6.60% from 5.52 % in Q4 as more cardholders relied on their credit cards to meet day-to-day expenses.
Delinquencies on consumer debt, including auto loans, rose to 3.23% in the first quarter, up from 3.22% in the earlier quarter. During the same period, unpaid balances on these consumer loans jumped to 3.35% from 3.16%, noted the report.
Higher delinquencies…force companies to squirrel away capital to reserve for potential losses; ultimately, companies must write off loans if customers can’t pay up. That could mean more trouble for firms such as Citigroup Inc. (C), GMAC Inc., Bank of America Corp. (BAC), American Express Co. (AXP), Capital One Financial Corp. (COF), Discover Financial Services (DFS) and JPMorgan Chase & Co. (JPM).
In the first quarter, delinquencies on bank-issued credit cards rose to 4.75% compared with 4.52% in the previous quarter, according to the report. Moreover, the balances on those delinquent credit-card accounts jumped 1.08 percentage points to a record 6.60% of total credit-card debt.
The report defines consumer delinquencies as borrowers who are at least 30 days behind on payments on debt ranging from credit cards and auto loans to mortgages.
Delinquencies for home equity loans reached record highs, rising to 3.52% in the first quarter.