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Texas consumers increasingly unable to pay credit card balances

On Behalf of | May 8, 2019 | Bankruptcy

Credit card charge-offs increased to 3.82% in the first quarter of 2019, which was the highest rate since 2012. Capital One had a charge-off rate of 5.04% during that time period. Furthermore, the seven largest credit card companies said that the number of accounts 30 days past due also increased. When an account is 30 days past due, a write-off will be more likely in the future.

The reason why these numbers are increasing may partially have to do with the information that credit card companies have. Individuals who were impacted by the financial crisis may have seen negative events fall off of their credit reports. Therefore, lenders may not be getting an accurate picture of a person’s ability to repay their debts. To protect themselves, card issuers are tightening their lending standards. At Discover, fewer credit line increases are being made available to new and existing customers.

It’s worth pointing out that the current charge-off rate is still near historic lows. Capital One also said that it was going to increase its efficiency rate by 2021, which resulted in its share price rising. Overall, credit card companies are still going to offer rewards and otherwise cater to quality customers even while they get stricter with others.

Individuals who are unable to repay their credit card debt may wish to file for bankruptcy. Taking such a step may allow a debtor to have existing balances discharged without losing property. If balances are discharged, an individual won’t need to repay them. During bankruptcy cases, creditors are generally not allowed to call debtors or contact them by mail. Legal counsel could explain the additional bankruptcy benefits, such as having debts discharged in a matter of months in a Chapter 7 case.