With no end in sight yet for the economic recession, more Americans are losing their jobs and finding it harder to pay off their credit card debts and other loans. The tough economic situation is making it difficult for many cardholders to settle their dues on time, says the American Bankers Association or ABA.
For the first time in history, delinquencies have reached an all-time high during the first quarter of 2009. The ABA defines delinquent borrowers as consumers and cardholders who are fail to pay loans and debts for more than 30 days.
Based on data gathered during the first three months of the year, credit card delinquencies rose to 4.75 percent, a 0.23 increase over the previous period - the fourth quarter of 2008. The unpaid balances for those accounts amounted to 6.6 percent, a full percent higher.
In the same report, the ABA cited an increase in the composite delinquency rate for the eight types of loans it currently monitors. The organization added that the rate rose to 3.23 percent for various types of loans like auto loans and home improvement loans.
James Chessen, a senior economist at the ABA, said that current trend is caused by the severe employment shortage that the U.S. is facing. Without proper jobs, many consumers are falling behind their regular payments, he says.
Chessen said that the situation can improve if companies and employers start hiring once more. The economist also added that unless the economy recovers significantly, the industry should expect a higher delinquency rate in the near future.
The ABA analyst however, admits that because of the recession, more American families have become more aware of their financial standings. As a result, consumers are cutting back on unnecessary expenses and figuring out ways to maximize their earnings. People are also giving more focus on their savings in light of the severe economic situation.
Experts say that some delinquent cardholders have expressed the desire to declare bankruptcy in order to get protection from card companies and banks. The ABA however, warns against resorting to declaring bankruptcy because of the long-term consequences associated with it.
The organization cautions that while it may be tempting for people to claim bankruptcy, it is a short-term solution with dire results in the end. Experts say that financially burdened consumers should talk with their creditors to find a solution for their debts and loans.