Posted on 07/05/2006 5:39:20 AM PDT by Hydroshock
Rising Interest Rates, Higher Gasoline Prices Make It Harder for Consumers to Handle Debt
NEW YORK (AP) -- Rising interest rates and higher gasoline prices are putting the squeeze on consumers' budgets, and many are finding it harder to keep up with their bills. Credit counseling agencies say that consumers are coming in in droves seeking help. ADVERTISEMENT
"My phones are going crazy," said Howard Dvorkin, president of the nonprofit Consolidated Credit Counseling Services Inc. in Fort Lauderdale, Fla. "Consumers are carrying an exorbitant amount of debt -- and they don't have any savings to fall back on if things don't go right."
An important measure of consumer financial distress, late payments on credit cards, ticked up in the first quarter, according to figures from the American Bankers Association. The Washington, D.C., based trade group said the percentage of bank cards 30 or more days past due increased to 4.40 percent in the January-March quarter from 4.27 percent in the final quarter of 2005.
The Federal Reserve's decision last week to raise short-term interest rates for the 17th consecutive time will boost yet again borrowing costs for consumers, likely prompting more delinquencies on credit card bills -- as well as on auto loans and mortgages.
The slowing economy also is depressing income growth, so a greater percentage of take-home pay is going toward necessities and less is left over for debt payment.
Among the consumers who recently put a call into Dvorkin's counseling center was Andreia Marshall, an assistant project manager for a builder in Delray Beach, Fla.
Marshall said that after she broke up with her boyfriend, her paycheck wasn't big enough to cover her apartment rent, higher gasoline prices and other day-to-day expenses. Soon she started falling behind on her credit card bills.
"It got to the point where the credit card companies were calling," she said. "It's overwhelming, you feel as if you're drowning and you feel bad about yourself."
With help from a credit counselor, Marshall is working out a budget and whittling down her $13,000 in card debt, which she figures could take 3 1/2 years.
"I have to think about everything I spend," she said. "Sometimes in the grocery, I have to say to myself, 'Do you really need to buy this?' And I'm looking at things like, how can I not spend $80 on dry-cleaning."
Marshall said that instead of feeling deprived, she's feeling good about it.
"I'm proud about what I'm doing," Marshall said. "I'm paying that debt and getting educated, and I know I won't make the same mistake again.'"'
Catherine Williams, a credit expert with Money Management International, a Houston-based financial counseling and education agency, said rising costs for gasoline and utilities were only part of the explanation for rising credit card delinquencies and increased consumer financial stress.
"People refinanced (their mortgages) six months or a year ago, so the 'house bank' is empty," Williams said. "Most can't go back and tap their home equity again."
In addition, she said, consumers can only juggle debt payments for a while. As she put it: "You let the car payment go one month, then the house payment. Then you make a lot of little creditors happy for one month, maybe for two months. Then it becomes obvious that you have to catch up on car payments, and everything else slides."
Williams called it "a dangerous strategy" because consumers who let accounts go delinquent risk harming their credit ratings. A poor credit rating makes it harder for consumers to get loans and can force them to pay higher rates on the loans they do get.
Consolidated Credit's Dvorkin pointed out that millions of Americans rushed to declare bankruptcy before the law change last fall made it harder for them to discharge unsecured debts. The high level of bankruptcy filings temporarily depressed the delinquency statistics and other measures of consumer financial distress, he said.
"Now we're seeing a new crop of people starting to get into trouble," he said. "They can't keep up. They're the ones most affected by increased gas prices and higher rates."
He said juggling payments is one of the "leading indicators" that a consumer is in trouble. He added that other telltale signs are:
-- You only make minimum payments month after month.
-- You're taking cash advances on one credit card to make the minimum payments on others.
-- You delay -- or are late, with important payments, such as the monthly mortgage.
-- You put off necessary activities, such as doctors' appointments.
If folks can't afford the cost of living there, they should move.
In general, if you've got yourself in the position of having to factor your credit cards, the economy isn't your problem. Your spending habits are.
This article is basically Boo-Hoo Debtor crap.
We thought of that but it hasn't panned out. At our ages, a job hunt is difficult. It's our kids that are struggling to survive. Just pulling up stakes is easier said than done.
It apparently has for most of the anectotal examples in the article.
My response is valid. It's NOT rosey here.
By the way, how many poor people have decks anyways?
?????????
You don't get paid enough, right?
The economy is growing (if not where you are, then at other locations). You won't move. I don't imagine you are eager to pick up new skills (correct me if I'm wrong).
What can change that will help you have a better life?
That's not helpful if you don't have the "werewithall" to do so.
Just a note on civility. I have always viewed it as in poor taste to make fun of others misfortunes. Even when they, themselves are partly or at whole to blame for those misfortunes.
I don't spend $80 a year in dry-cleaning--and the little I do is for my kid's winter coats and the like--go figure I can balance my monthly budget pretty damn well. Wonder if there is a connection.
I'm in Florida and ran into a friend of mine yesterday who is a mortgage broker. We've owned our home for years, so I'm not "up" on what mortgage payments are, but I do know that insurance and taxes are killing people.
He told me the "low end average" of a mortgage payment in our county is $1500-1700 per month (this includes mortgage, taxes and insurance)...I don't know how the young people are affording that, no wonder they're squeezed financially.
I'm quite certain that doesn't apply in this case. [smiling sweetly]
I now see why you put your flame suit on. It wasn't for incoming fire.
My mom and dad paid off their house last year. The insurance and tax bill they have to pay now are more then their total mortgage payment was at the start of the loan. This has to be affecting the economy.
Hey, did you learn all them neat words at East Carolina? Is that Pirate talk, ye scurvy dog?
Arrrrrggggghhhh!!!!
Hubby gets a decent wage. The problem is housing. It's gone bonkers since 9/11. Our kids are a different matter. Jobs aren't plentiful in this area. And to afford housing, both people have to work.
You won't move. I don't imagine you are eager to pick up new skills (correct me if I'm wrong).
You're wrong. We'd move in a heartbeat and job skills are not a problem. We've been trying to move. Even our kids would pull up stakes and follow. The problem is our ages. We got caught in a housing crunch at a very bad time. Hubby works on elevators and you need to be where they are. Job openings are not plentiful. And housing here is at a premium. We'd LOVE to move.
I spend ~ $100 a month on dry cleaning, it is part of some folks' necessities...
The thing that keeps us afloat (no pun intended) in Florida is that as long as you live in your home and don't move, you're taxes are protected from huge increases by Save Our Homes. They can only raise taxes about 3 percent per year. If we were to sell and move into a home of comparable value, our taxes would at least quadruple.
Glad it's not part of mine
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.