High credit card late payments indicate impending financial troubles

Consumers are facing problems in paying their credit card bills. The latest reports of the country's leading credit card companies have revealed this fact. The reports reveal that credit card late payments have surged in the month of September 2011. This has happened for the first time since February 2009.

Credit Card Late Payments Have Increased Yet Again

The leading credit card companies have reported that there has been a small rise in the number of people paying their credit bills 30 days late. There can be 2 possible reasons why credit card late payments have increased in the month of September:

Consumers have started feeling less responsible for their credit cards.
Consumers are facing a severe financial crunch.

Delinquency Rates Across Major Credit Card Companies

The officials of Capital One have reported that the credit card late payments rate has touched 3.65% in the month of September. The delinquency rates for the month of July and August were 3.37% and 3.43% respectively.

There was a steady decline in the delinquency rate throughout the year 2010. However, the delinquency rate has started to increase post May 2011. The only encouraging news is that the charge-off rate for Capital One's international credit cards has dropped from 6.21% to 5.65% in the month of September.

On the other hand, the delinquency rate at American Express has only increased to 1.5% in September 2011. There has only been a 0.1% increase in the delinquency rate from the month of August 2011 to September 2011.

As far as the other credit card companies are concerned, the delinquency rate at Discover was 2.5% in the month of September. This figure is again 0.1% higher than that of the month of August. The delinquency rate in the month of August 2011 was 2.49%.

Bank of America has seen the highest increase in the delinquency rate in the month of September. As per the reports, their delinquency rate has increased by 0.3%. The credit card late payment rate has increased from 3.96% in the month of August to 3.99% in the month of September.

Financial Experts Warn of Impending Troubles

Though there has been only a marginal increase in credit card late payments, financial experts are not taking this lightly. They are of the opinion that this can be an indicator of future potential defaults.

"There is a great probability that more people will get behind on their payments in the coming months as the government has still not been able to bring down the unemployment rate from 9.1%. Moreover, with another recession looming in the country, the financial situation of consumers is less likely to improve."

So, this means that delinquency rates may not decline in the near future.

Factors Limiting Financial Impact on Banks

It is said that banks and financial institutions are less likely to suffer severe losses even if delinquency rates increase in the future. The factors that may lessen the financial impact on credit card companies include:

1. Less Number of People Are Using Credit Cards These Days

Several consumers have stopped using credit cards after the country faced an economic downturn in the year 2007. According to the 3 major credit reporting agencies, nearly 8 million people have left the credit card industry in the year 2010. Some have closed their credit accounts out of their own will. Others have been compelled by credit card companies to terminate their accounts.

The number of credit card accounts opened by some of the major credit card companies has also reduced in the year 2011. The number of accounts issued by MasterCard has dropped by 30% during the period between 2007 and 2011. The number of accounts issued in the year 2007 was 488 million as opposed to 343 million in 2011.

2. Sharp Fall in Credit Card Balances

Another factor that would limit the impact is the overall fall in credit card balances. The total credit card balance in the month of August 2011 was $790.1 billion. This figure is $182 billion less than what it was in the year 2007.

Therefore, even if consumers struggle to make payments on their credit card bills, banks and financial institutions don't have as much to lose. Their overall financial health is less likely to deteriorate in such circumstances.

How to Get Help with Credit Card Late Payments

If you are struggling to make credit card payments on time or dealing with high interest rates and late fees, you don't have to handle it alone. Getting professional debt advice can help protect your credit score and resolve mounting balances.