Back on August 28th I wrote about the issue of the increased use of credit cards to pay for gasoline and what it means. Now, via CNN, comes this news.
There was a record number of delinquent credit-card accounts reported in the second quarter, according to data released Wednesday from the American Bankers Association.
A key reason for the increase in delinquencies, the ABA said, was the strain of higher gas prices, noting that since December 2004, the average cost of filling up the gas tank of a mid-size car has risen just over $17, from $30.63 at the end of last year to $47.78. In June, the cost averaged $38.33.
As I said in August, one sign that someone is in financial difficulty is when they are using credit cards to bay everyday expenses and not paying off the balances, either within the month they are incurred or a reasonable time thereafter. This appears to be what some people are doing.
Of course, recent events in the South lead to other questions:
An obvious question, post-Katrina, is what will happen in the next few quarters to delinquency numbers, given that some evacuees, left jobless and homeless, may be relying on credit cards to get them through the initial stages of rebuilding their lives.
If there is going to be a Katrina effect, Chessen said in an interview, it may not show up until the fourth quarter, which more fully encompasses the post-Hurricane period.
I suppose we shall see.