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The American Bankers Association (ABA) recently posted statistics concerning delinquent credit card payments. The data indicates a continued high delinquency rate, which in turn leads to lower credit scores since past payment history accounts for about 35% of one's credit score. The more recent a tardiness, the more credit score points are sacrificed. A consumer could be 30, 60, 90 or more days late on an account and the impact on his or her score becomes progressively more pronounced. Logically, a history of late payments on several accounts will cause even more damage than just a single account. The good news is that by paying your bills consistently on time, you can greatly improve your overall score.

In a press release by the ABA, the ABA's chief economist, James Chessen, suggested 4th quarter gas prices and stronger economic indicators "leaves me hopeful that delinquencies will continue to fall." But he conceded that the adverse impacts of a string of devastating Gulf Coast hurricanes have yet to be fully felt on consumers' pocketbooks.

Chessen predicted that the hurricane impacts were likely to be spread out over the final three months of 2005 and the first three months of the 2006. The statistical analysis is not yet compiled and remains to be seen.

But I wondered if delinquent payments might be impacted further by adding three other concerns.
	Federal guidance to increase minimum credit card payments as illustrated in the recent article Confusion Rampant
	The advent of the new bankruptcy law as demonstrated in the article Affect of New Law
	The normal Christmas holiday spending spree by consumers as discussed in the article Holiday Spending

Fully aware that even ABA was "crystal balling" the future, I asked Linda Sherry, Director of National Priorities at Consumer Action, if she anticipated holiday spending to affect this delinquency trend. "Every year there are people who complain about credit card hangover after the holidays. Our complaints don't really show a spike [after the holidays], just continued complaints about unfair treatment to folks with large balances.... I see these as 'captive customers' who can't jump to another card, so the [card] companies do what they want."

I also asked if Consumer Action saw the Federal guidelines of increased minimum payment affecting this trend. "We have seen some complaints about this and the ones we have seen are pretty shocking. One guy's minimum monthly payment jumped from $282 to more than $800! Obviously he had a large balance..."

Naturally, we will have to wait for the official reports on whether credit card delinquencies will rise or fall in 2006. One thing seems certain, though. Even if delinquencies fall, they will certainly negatively affect our economy for some time to come. Furthermore, we can be sure that delinquencies can stagger our personal budget with many late fees hovering around $30.

Unfortunately, the effect of delinquencies on consumers goes far beyond late fees. Interest rates on many delinquent accounts quickly soar to above 30% and remain there as long as the creditor chooses. Finally, because of universal default policies, being delinquent on one card can trigger penalty rates on others, even if your payments are current on your other cards.

The bottom line is, even if all you can do is pay the minimum payment, DO IT!

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