Credit card delinquency rate rises worryingly

Many consumers in Michigan and around the country are having difficulty meeting their financial obligations despite low unemployment, rising wages and sustained economic growth according to figures from the Federal Reserve Bank of St. Louis. The bank says that the credit card delinquency rate has risen from 2.12 percent during the second quarter of 2015 to 2.47 percent currently, which means that more than $20 billion in this type of revolving debt is currently at least 30 days past due.

While soaring delinquency rates are a serious concern, economists are even more worried about the reasons why so many Americans are finding it hard to pay their bills. When the consumer advice and information website NerdWallet asked more than 2,000 consumers why they had failed to make their minimum monthly credit card payments, almost two-thirds of them said that they just did not have the money. One in three said that the cash they had earmarked for paying their credit card bills had been used to cover the costs of essentials like food, rent or utilities. A further 32 percent told NerdWallet that an unexpected expense or emergency was to blame.

Allowing revolving balances to become past due can be costly for borrowers. Lenders generally charge late fees of $20 to $30 when credit card accounts fall 30 days past due, and they may impose punitive interest rates of up to 29.99 percent after 60 days have passed without a payment being received. Borrowers who bring their accounts up to date quickly are not usually rewarded as these penalty rates are rarely reviewed until at least six payments have been made.

In addition to the mounting stress caused by an unmanageable financial situation, borrowers who fall behind on their bills face almost daily harassment from banks, credit card companies and debt collectors. Attorneys with debt relief experience may understand the anguish that this type of relentless badgering can cause, and they may point out that the automatic stay issued when a personal bankruptcy petition is filed puts an immediate stop to it, at least temporarily.