THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, October 30, 1995 TAG: 9510280227
SECTION: BUSINESS WEEKLY PAGE: 15 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY TOM SHEAN, BUSINESS WEEKLY
LENGTH: Medium: 63 lines
Sharon P. Neuhaus jokes about being called a ``plastic surgeon'' and refers to the fish bowls outside her office door.
All three are filled with bits of plastic bearing names like Citibank, Signet, Crestar, NationsBank, Discover, Sears, Haynes, Texaco and scores of other credit-card issuers.
They are colorful reminders of how available consumer credit is - and how quickly individuals can be overwhelmed by debt.
Part of the demand from consumers for help reducing their debts can be attributed to the blizzard of solicitations from card issuers, says Neuhaus, manager of the Consumer Credit Counseling Service of Virginia's Chesapeake office.
Many offer a low introductory rate to individuals if they transfer an existing balance to a new card.
``When they receive an offer for a low rate on a new card, people transfer their balances, but they don't close their old account, so now they have two accounts,'' says Neuhaus.
And when faced with unexpected bills, people often resort to the older card account for additional credit and their debts quickly accumulate, Neuhaus says.
The abundance of new offers enables individuals to take on hefty amounts of additional debt very quickly, even if they are already stretched to the limit on their existing cards.
``People in debt way over their heads tell me they still get letters saying they've been pre-approved for more cards,'' says Ed Welp, president and chief executive officer of Child and Family Service of Southwest Hampton Roads, a Portsmouth agency with a credit counseling program.
At the Bankcard Holders of America, ``we are very concerned about the amount of debt that people are carrying on their credit cards because it is growing astronomically,'' says Ruth Susswein, executive director of the consumer advocacy group.
One reason for her concern is that household incomes have not kept pace with the ballooning volume of credit-card debt. The widening gap is troublesome, Susswein says, because individuals are likely to take on even more debt during the peak season for consumer borrowing, the holiday shopping period of November and December.
Last month, the American Bankers Association expressed worries about the rising delinquency rates for consumer loans and singled out tardy repayments of credit-card debt.
At the end of June, the percentage of card accounts that were delinquent had climbed to 3.26 percent from 2.44 percent last September.
``In the last 10 years, bank-card delinquencies have been higher only three times,'' in mid-1986, in early 1991, and in late 1991, the bankers' association said in its Consumer Credit Delinquency Bulletin.
``As a result, credit-card issuers will most likely tighten their credit standards in coming months,'' the association said. MEMO: [For a related article, see page 12 and 14 of this date.]
KEYWORDS: PERSONAL FINANCE CREDIT CARDS CREDIT CARD DEBT by CNB