Report: Credit Card Delinquencies Rising

Just as the holiday shopping season gets into full swing comes word that many people aren't paying off the credit card debt they already have.  The latest Credit Access Survey from the Federal Reserve Bank of New York shows credit card delinquencies, account closures and rejections are all on the rise.  Specifically, the rejection rate for credit card applications is at 20.8% this year, up from 14.4% last year.  In addition, the proportion of respondents saying they've had an account closed by a lender hit 7.2% this year, compared with 5.7% last year.

The New York Fed report reflects the bigger picture of surging credit card debt in the U.S.  Bruce McClary with the National Foundation for Credit Counseling has seen the same trend...people are charging more to their cards and carrying higher balances.  "There are some dangerous financial habits that are taking shape, and some of it might be the result of the healthy economy," says McClary.  "People feel more comfortable putting their purchases on credit, and they don't feel that sense of urgency in paying it off immediately."

While many folks are living high on the hog, there are signs the good times won't last forever.  The recent volatility in the stock market and rising interest rates are warning lights for those who are charging more and carrying larger balances.  "Those are bad financial habits," says McClary.  "Carrying large balances from month to month means you're paying the maximum amount of interest on those purchases."

For that reason, McClary recommends having fewer credit accounts open and paying down balances as quickly as possible.  "The sooner you pay off your debt, the more affordably you're going to be able to do it, and the less you're going to have to pay in interest over time," he says.  "And if there is an economic slowdown that impacts you, you'll be in a better position to survive it."

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