Rewrite

Credit card debt cause problems for everyone.

• Experts say more and more credit card debt is going delinquent and the middle class is starting to feel the pinch.
• Credit card debt continues to increase and usually leads to bankruptcy.
• Borrowing limits have declined despite the increasingly difficult economy.
• Using a credit card is important during these times however banks are cutting back on how much they’ll lend.

The debt side of things

As the recession grinds on, more people are being forced to rely on their plastic, and increasingly skittish banks are cutting back on how much they’ll lend. The credit card crunch is affecting people in different ways as economic conditions deteriorate and borrowing limits are reduced. 

Credit card debt is usually a major factor in bankruptcies as well, and the monthly number filed in Southwest Florida has gone from 24 in January 2006 to 723 in August 2009: up more than 30-fold.

At Suncoast Schools Federal Credit Union, the amount of delinquent credit card debt has almost quintupled in about three years, from $3.7 million near the height of the real estate boom in March 2006 to $17.1 million in June 2009, the most recent month with data available.

Suncoast president Tim Montoya said like most lenders, he’s had to set tougher limits on customers’ credit cards.

 ”It’s not that you’re being so strict nobody qualifies, but we have an entire department working with people on forbearances and workouts and extensions,” he said. “More than we ever conceived of doing in the past.”

Locally, consumers in trouble with credit cards or other debts are being directed to private, nonprofit agencies for assistance, including Consumer Credit Counseling Service of the Florida Gulf Coast at 278-3121 and Christian Financial Counseling at 337-2122.

Lending and borrowing

The national charge-off rate - percent of delinquent credit card loans removed from the lenders’ books – hit an all-time high of 9.55 in the second quarter of 2009, according to the Federal Reserve. That’s by far the highest rate for any kind of consumer credit, which had a total charge-off of 5.7 percent in the second quarter.

 That’s because for most people, the credit card is “the first bill people stop paying” when they get into financial straits, said Richard Wayne, senior director of public relations at the American Bankers Association.

Faced with that, lenders are trying to limit their losses.

In the second quarter of 2009, U.S. households received 349.1 million credit card offers, down 67 percent from the 1.1 billion a year earlier but off only 6 percent from the first quarter of ’09, according to Synovate, a market research company.

 Some of the biggest lenders were ramping up their efforts, according to the Synovate study: Bank of America was up 77 percent and Citibank up 65 percent over the first quarter.

As the downturn continues, people generally have been borrowing as little as possible. U.S. consumer debt outstanding has been falling steadily since the fourth quarter of 2008 although the total was still $2.5 trillion in June, the last month available, according to the Federal Reserve.

Montoya said he sees that trend in the Suncoast members’ borrowing.

“We’ve had overall fewer loans in terms of dollars, ” he said, “our loan balances have decreased. People are cutting back, saving money.”

But for others, borrowing is a matter of economic survival.

Personal Accounts

- Despite a brutal economic downturn, Jack Gordon religiously pays more than the minimum on his four credit cards as he tries to keep Salvatore’s Italian Restaurant in Cape Coral afloat. Still, the amount he can borrow on the cards has slowly been cut back in recent months.

“They have all sent me notices that the amount of money I can withdraw has been capped and my interest rates have all gone up,” Gordon said.

- Maggie Pennyworthy and her husband Jason, both 76, of Lehigh Acres, are fighting to survive as they deal with the aftershocks of reduced credit limits and unemployment.

 ”Until a couple of months ago we were never late, paid on time, nine times out of 10 paid more than the minimum,” Maggie said. “Then they started increasing the interest and limiting our ability to borrow. Now we’re behind the eight ball. We’re on Social Security and we’re fighting.”

Maggie said she’d like to pay off the credit cards, but Medicare supplemental insurance and the mortgage come first.

- In Fort Myers, Harvey Carson is also finding credit card problems are aggravating an already dismal business climate for the Sub & Pub he owns at Clifford Street and West First Street, just west of downtown.

“All of a sudden my interest rate went from 9.99 percent on one card to 27.99 percent” and the other cards soon followed suit, he said.

 He’s trying to work things out with settlements and a debt-reduction program. 

 

 

Visual Art Idea: I’d include some graphs that display the information about credit card debt and some audio from people who are dealing with this issue and also from some experts in the field.