CREDIT CARD DELINQUENCIES - The Next Bubble to Burst?

Good Morning!

We have all experienced the slowing Real Estate and stalled, retrenching Mortgage Markets.  In some parts of the Chicago area, these factors have hit us hard!

But is there another shoe to drop?

The credit freeze and the turmoil over the last three weeks on Wall Street has hit many of those seeking auto loans broadside.  Small business loans - harder to come by, until the markets begin to balance.  Unsecured consumer loans - tougher to find.

But what of the thousands, perhaps millions, of Americans, faced with the need to use their credit cards more extensively in the past year - often, just to make ends meet?  Many families have had to charge the most necessary of expenses, including food, and medical care.  A few others have used those "free" credit card draw checks to pay recurring expenses - because they feel they MUST!

Here's some sobering news - credit card delinquencies may be fuel the next big financial crisis!

The Federal Reserve Bank of New York,  in a study just released last week, found while Mortgage Delinquency Rates are up in 73% of counties across the nation, rates for delinquency of Consumer Credit Cards is up just about as much. 

Over seven out of ten counties across the country (71%) report higher credit card delinquency rates compared to last year!

Review the NY Fed's Interactive Map showing Mortgage and Consumer Credit Card Delinquencies across nearly every county in the U.S. (2,838 of them).  Shannon County in North Dakota tops the list, with 11% of its Bank Card holders at least 60 days in arrears, and 17% of its mortgages at least 90 days delinquent. (This county has one of the lowest per-capita incomes in the U.S. - hence, the exaggerated numbers here).

Roughly 1,050 counties have Consumer Credit Card Delinquency Rates at two percent or higher - seven showed near-zero delinquency percentages.  Near-zero Mortgage Delinquency Rates were seen in 127 U.S. Counties, while 1,100 showed plus-2% mortgage delinquencies.

The NY Fed used Trans Union LLC Trend Data for its report.  The data excludes the 10% least populous counties across the U.S., as the potentially high percentages in these sparsely-populated areas might skew the national figures.

Experts predict the rate of delinquency for mortgages and credit cards will likely continue to rise in 2009.  As the economy weakens, and default rates increase, banks are likely to tighten their credit-granting standards even more, as more jittery consumers lose their jobs, face stalled raises in income, and may have more trouble paying their monthly credit card bills.

The problem is - many over-extended consumers are in "denial" that they have a problem, and often feel they have few choices to get by.  They hope for a quick economic turnaround that no one is predicting.

See our post yesterday via BlogChicagoHomes.com for more, as well as a link to Sudeep Reddy's post today via Real Time Economics on the Online Wall Street Journal.

DEAN & DEAN'S TEAM CHICAGO