U.S. Sees Record-high Delinquencies

The credit card industry is expected to post higher losses this quarter as a result of the latest figures from the American Bankers Association (ABA). According to the financial organization, credit card delinquencies in the U.S. have reached a record high level during the second quarter of this year. Many analysts believe that the increase in delinquencies is due to the declining employment figures. Experts now say that the unemployment rate in the U.S. can reach the 10-percent mark by the end of this year or early in 2010.

According to the ABA's Consumer Credit Delinquency Bulletin, payments 30 days late or more, better known as delinquencies, rose to 5 percent by June 30, the end of the second quarter. The rate during the previous quarter stood at 4.8 percent. By comparison, the delinquency rate almost three decades ago was only 2.8 percent.

Analysts point out that the worsening job market, coupled with the troubled economy are to blame for the poor performance of the cardholders. Economic experts usually rely on the close relationship that delinquencies and unemployment rates have to predict potential credit industry losses.

In some areas of the U.S., the credit card delinquency rate is expected to be substantially higher because of higher unemployment rates. Chicago, for instance, expects delinquency rates to reach the 10-percent mark with the state jobless figure standing at 10.5 percent, some 0.8 percent higher than the national average.

Economic analysts, however, are optimistic that the worst recession in 70 years may finally be in its closing months. Experts say that even with the end in sight, the U.S. economy still has a long way to go before fully recovering from the global financial meltdown. They add that the important thing is for businesses and corporations to begin hiring once more to avert further problems.

The touch economic environment has also altered the spending behavior of most Americans. Many economists believe that consumers are keen on saving a larger portion of their income rather than spending them. Analysts say that the focus many Americans now have is on their savings and how to make the most of the money they have. This radical change in the way of thinking can lead to significant changes in the credit card industry, which has relied on unrelenting purchases by cardholders in the past. With new spending behaviors in place, many economists are hopeful that cardholders will avoid incurring substantial credit debts.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.