Posted On: December 17, 2012

Birmingham Bankruptcy Weighed as Credit Card Debt Grows

Americans love their credit cards. creditcard1.jpg

Even if the recession caused them to take a temporary break, people are once again increasingly relying on this form of payment.

Our Birmingham bankruptcy lawyers know that there is nothing inherently wrong with credit cards, except that it's so easy to find yourself in trouble with them.

Credit reporting agency TransUnion released recent figures showing that the average amount of credit card debt per borrower in the country shot up by 5 percent when comparing the three-month span of July through September this year to that of last year. It now stands at roughly $5,000 per borrower.

This is not necessarily a bad thing - until you consider that as this figure has gone up, so too have the number of delinquent borrowers. Those credit card debtors who were at least three months overdue were up to 0.75 percent. That's an increase of about .04 percent from what it was this time last year. Compare this to where we were back in the mid-1990s, when the late payment rate was just 0.56 percent.

Over the last couple of years, as many Americans were hit with lay-offs, higher prices for goods and a housing market that was flipped upside down, people stopped relying so heavily on credit cards. National data indicated many were working diligently to pay that debt down - as best they could, of course, as many were on the brink of losing their homes and made that the higher priority.

Some economists believe the uptick could simply be the result of end-of-the-year, holiday spending. But a huge part of it is the bolstering of consumer confidence, without which we likely wouldn't see much of an increase one way or the other - particularly because we're comparing the same time frame for the last two years and we're still seeing an increase.

The other factor - and this is important - is that credit card companies are issuing more cards, even to those who may not have great credit. TransUnion research shows that the number of new credit card reports rose by more than 3 percent in the second quarter of the year compared to a year ago. Of those, 1 out of 4 went to consumers who have a non-prime credit score, which is defined as anything lower than 700 on a scale of 501 to 990.

There is an upside to this in terms of those who are diligently working to rebuild their credit after a rough spot. However, those who may not yet have managed to reign in their spending habits may soon find themselves in a world of trouble because their interest rates are going to be much higher. Missing even a couple payments could set the stage for an out-of-control spiral.

If you find yourself struggling with credit card debt, please don't delay reaching out to us to see how we can help.

If you need to speak to an Alabama bankruptcy attorney, contact Eversole Law at 866-831-5292.

Additional Resources:
Average credit card debt per borrower inches up, Nov. 19, 2012, Associated Press via CBS Money Watch

More Blog Entries:
Financial Independence a Matter of Life and Debt, Sept. 30, 2012, Birmingham Chapter 7 Bankruptcy Lawyer Blog