Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, October 27, 1995 TAG: 9510270129
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: NEW YORK LENGTH: Medium
But Boyne, a Cincinnati textbook editor, wants more. She recently applied for a General Motors credit card so she can earn a rebate and apply it toward a car purchase next year.
Boyne is not alone. Millions of Americans can't resist taking up offers for new plastic because they like the perks and they're always looking for better rates.
The average American wallet holds seven credit cards, contributing to an explosion of consumer debt, according to RAM Research, a Frederick, Md., company that follows the credit card industry. Now a rise in late payments has some analysts and regulators worried that consumers are overextended and companies that lend money are headed for trouble.
``There's been some discouraging words on the credit card business,'' said David S. Berry, head of research for Keefe Bruyette & Woods Inc., a New York investment firm that tracks bank earnings.
U.S. consumers had a $988.6 billion debt burden as of August, according to the latest Federal Reserve Board figures. That's up $119 billion, or nearly 14 percent, from the same time last year.
Meanwhile, signs are everywhere that people are having problems paying off those bills. The American Bankers Association said last month that 3.26 percent of all consumer loans, including credit cards, home equity and auto loans, were at least 30 days past due as of June 30, the most recent data available. In June 1994, the delinquency rate was 2.56 percent.
Banks were unable to collect 4 percent of credit card loans they made in the first four months of this year, up from 3.85 percent in the last four months of 1994, according to Moody's Investor Services, a credit rating agency.
An uptick in bank losses on credit card loans and higher delinquencies at companies that make home equity loans so alarmed investors earlier this week that many dumped bank and finance company stocks, reasoning that now's the time to get out.
Bankers say the worries are overblown, because higher delinquencies always occur when loan growth surges, as it has in the past 12 months.
They say they're still making more money from interest charges and fees than they're losing on bad customers and think they have to keep churning out the offers to compete for the best borrowers.
Boyne says she scours the many come-ons she gets in the mail for low fixed-rate card offers. She'd happily transfer the balance from one card to a new piece of plastic with a lower rate.
She thinks she saves money using credit cards, because some retailers give discounts to customers who use their co-branded plastic. Boyne says she doesn't carry a balance on most of her cards and pays all her bills on time.
Many experts expect banks and finance companies to step up offers of credit, as they typically do when the holiday shopping season approaches. And if the economy slows down, as many expect, consumers who are sitting on a lot of debt could become strapped.
by CNB