How to handle rising credit card delinquencies and mitigate risk

According to recent reports, seriously overdue credit card debt has reached its highest level in over a decade, with individuals aged 35 and under facing the most challenges in making timely payments. Data from the Federal Reserve Bank of New York shows that the share of credit card debt that is severely delinquent, meaning it is more than 90 days overdue, rose to 10.7% in the first quarter of 2024, up from 8.2% a year ago.

Experts recommend seeking help from nonprofit credit counselors if at risk of delinquency. These counselors can provide free consultations and assist in creating debt management plans with lower interest rates and fees. It is important to be cautious of for-profit debt consolidation companies that may charge higher fees.

As the Federal Reserve has raised its key interest rate to combat inflation, the average annual interest rate on new credit cards is now 24.71%. The end of pandemic-era aid programs, such as stimulus payments and increased unemployment benefits, has put additional financial strain on consumers, particularly for renters and lower-income individuals.

Silvio Tavares, CEO of VantageScore, notes that delinquencies have surpassed pre-pandemic levels, and renters are especially vulnerable to falling behind on payments. Tavares emphasizes the importance of knowing one's credit score and staying up to date on payments to avoid additional interest and debt.

Overall, experts warn that a worsening economy could push more consumers into severe delinquency, and caution against overextending with "buy now, pay later" loans. Retail spending has also stalled, with consumers prioritizing necessities over discretionary goods.

It is crucial for individuals facing financial difficulties to seek assistance from nonprofit credit counselors and communicate openly with creditors to negotiate payment plans. By taking proactive steps to address delinquency, consumers can work towards improving their financial situation and avoiding further debt accumulation.


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