by: Huffington Post
Are you carrying debt because of doctor’s bills or medicine costs? If so, you’re not alone.
Many low-and middle-income Americans are paying for medical bills with their credit cards, according to a recent survey conducted by a research and policy center called Demos. The survey sampled 997 adults in February and March who had carried credit card for at least three months to find an average debt of $7,145 with $1,678 attributable to medical costs. Almost 50 percent of American households bought out of pocket medical expenses on credit, the survey found. (h/t Bucks)
The survey results reflect the tremendous burden that rising medical expenses are inflicting on American families. Healthcare costs, which rose almost 6 percent in the past year, are forcing many Americans to go without needed medical care. More people are also living without any health insurance. Over 25 percent of Americans ages 16 to 64 went without health coverage for at least some part of last year.
Medical expenses are even taking their toll on families with comprehensive insurance plans. Insurance premiums are increasing, but offering less coverage. An ordinary family under a job-based health plan will spend more $20,000in healthcare costs this year. That’s about 40 percent of the average household’s income.
All this is exacerbated by an economy, in which wages haven’t kept pace with rising prices. While the recession changed peoples’ attitudes toward debt, making them more careful about spending and less likely to borrow money, many Americans don’t have enough in their checking or savings accounts to pay for essentials.
Even though the average credit card debt reported this year decreased from its $9,887 level in the 2008, the percent of American families taking on credit card debt for spending related to necessities remains about the same as during the financial crisis. About two in five households used their credit cards for basic living expenses such as groceries and rent, according to the Demos survey.
by Credit.com on 05/23/2012
The nation’s largest credit card lenders saw a notable increase in the rate at which seriously delinquent accounts had to be written off as uncollectible during the month of April, but this was driven largely by problematic accounts at one financial institution in particular.
The number of charged off credit card accounts — those 90 days or more behind on payments that are stricken from lenders’ record books — increased significantly at Citibank in April, causing the entire credit card industry’s default rate to surge, according to a report from Dow Jones Newswires. The data, culled by Moody’s Analytics, show the total charge off rate for the nation’s top lenders increased to 5.21 percent of all outstanding balances, up from 4.92 percent in March.
However, the company also noted that these increases were likely not indicative of the future health of the credit lending industry, the report said. This is because Citi is likely to see improvements in its own credit quality throughout the year, and a number of other indicators remained positive as well.
For one thing, the payment rate — which shows the number of credit card users who have the ability to pay off their balance — slipped only slightly in April, to 21.49 percent from March’s 22.11 percent, but remained near all-time highs, the report said. Further, the national delinquency rate — the number of accounts 30 days or more behind on payments — slipped once again, to 2.59 percent of all outstanding balances from March’s total of 2.73 percent. This was the third straight month at which the national delinquency rate fell to an all-time low.
The latter factor is considered quite important because fluctuations in lenders’ delinquency rates are typically reflected in the charge off rate several months down the line. Thus, improvements in the former will lead to those in the latter, and shows that consumers are continuing to get a better handle on their credit card bills. This can be important to consumers not only because it will help them reduce their outstanding balances, but also because making payments on time and in full is the single most important aspect of maintaining a healthy credit score, which many borrowers know is of the utmost importance these days.
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In the last year or more, many consumers have made conscientious efforts to reduce their reliance on credit cards and increase the timeliness of their payments, leading instances of delinquency and default to slip to at or near all-time historic lows.
But lenders will likely see their net charge-off rates slip for one more quarter before expanding again by the end of the year, finishing 2012 with higher rates of defaulted accounts than they began with, according to the latest report from analysis firm Fitch Ratings, entitled “Credit Cards: Asset Quality Review.” At the end of the first quarter, the net charge-off rate observed by the nation’s seven largest credit card lenders stood at 4.02 percent, down from 4.2 percent at the end of 2011, and 6.39 percent in the first quarter of that year.
Further, charge-offs are well below the five-year average of 6.51 percent observed between 2007 and 2011, the report said. And because of trends in 30-day credit card delinquencies, which itself is well below the five-year average, it’s likely that the current charge-off rate will decline once again in the second quarter of this year.
However, the trend may soon reverse because consumers are once again feeling better about their finances in general, the report said. Portfolio contraction among major lenders more or less held steady in the first quarter of the year, and smaller card issuers actually saw more consumers opening new accounts.
As a consequence of this trend, which may also be the result of expanding credit standards that are allowing subprime borrowers to once again access lines of credit they were unable to tap just a year ago, it’s likely that defaults will begin expanding once again, trending back toward historical averages from the current levels. Many had long projected that there must be a logical point at which charge-offs bottomed out, and we could soon see that point.
Millions of accounts were written off by lenders as uncollectable during and immediately following the recent recession as card issuers tried to shield themselves from significant loan losses as a result of consumers who could no longer afford to pay their bills. However, the improving economy has emboldened most major lenders to once again extend credit to those who previously defaulted on their accounts.