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By Richard Burnett
The Orlando Sentinel, Fla.
Knight Ridder/Tribune Business News

Jewell L. Johnson helped set a national record last year, one that he would rather have avoided. The Orange County Convention Center parking-booth operator fell behind on his credit-card bill. Now he and his family are trying to dig out.

"When I moved here three years ago from Detroit, we had everything paid off," said Johnson, an Orlando resident. "Then, after some shopping trips here and other charges there, all of a sudden, the next thing I know, the credit cards are maxed and we're in a jam."

As it turns out, Johnson has plenty of company.

The number of Americans in hot water with credit-card companies hit an all-time high in late 2003, according to a recent survey by the American Bankers Association. Credit-card delinquencies in the fourth quarter represented a seasonally adjusted 4.43 percent of all outstanding accounts, the study said.

That translates into more than 53 million past-due accounts with a combined debt of about $36 billion, based on other data reported by government and private researchers.

And while delinquencies fell slightly in other types of consumer loans, the spike in past-due credit-card accounts appears to be the latest setback in Americans' ongoing battle with runaway debt, which now exceeds $2 trillion nationwide.

Experts say there's plenty of blame to go around: The sluggish economic recovery and persistent unemployment; escalating health-care costs and insurance rates; the proliferation of easy-to-get, pre-approved credit offers from card vendors; and the lack of financial discipline by many consumers.

Some also cite the job losses, financial strain and other long-term effects still emanating from the terrorist attacks in September 2001.

"Although we think our economy is becoming more positive, we're still seeing the after effects and damage of the 9-11 attacks, both on the economy and individuals," said Becky Nickel, a management consultant and certified financial planner in Maitland. "And we haven't seen the end of it yet."

Much of the problem can be attributed to lifestyle expectations and financial limitations during tough times, other experts say. Too often, people facing financial woes continue to pay with plastic, rather than cut expenses and tighten budgets. Of course, to be fair, many others use credit cards as a last resort to make ends meet.

"We have a lot of unemployment as well as a lot of underemployment these days," said George Janas, a principal in Consumer Debt Counselors, a nonprofit debt-management service in Orlando. "As a result, many people are literally living off their credit cards. Eventually, that bubble will burst, which seems to be happening now."

Those trying to tame the credit beast may find life even tougher as a result of a major trend in the card industry. Late fees, balance-transfer fees and pay-by-phone fees are going up by 25 percent or more, according to Cardweb.com, a Maryland-based firm that tracks the credit-card industry.

Also, if the economy does have a significant growth spurt and general interest rates begin to rise again, that would generate even higher finance charges for people strapped with big credit-card balances, experts say.

Despite such dim prospects, some observers found a ray of hope in some of the figures from the bankers' latest delinquency report.

Past-due personal loan payments, for example, totaled 2.68 percent in fourth quarter 2003, down from 2.75 percent in the prior quarter. Delinquencies in auto loans and home-equity loans also decreased slightly in the fourth quarter.

That could be a sign that many people in debt have a little more disposable income because of tax cuts or other economic factors, said Bob Closs, president of InCharge Debt Solutions, a nonprofit credit-counseling service based in Orlando.

"Their first priority is to protect their assets, such as homes and cars," Closs said. "Then, as is often the case, unsecured credit-card debt becomes a last priority."

But debt experts urge consumers not to let credit-card payments slide.

It is understandable that people want to protect their homes and cars, but neglecting the card debt damages another important asset -- their credit rating -- which can affect a person's ability to find a job, insurance or a home loan.

Consumer advocates advise credit-strapped people to develop realistic budgets to eliminate debt and reduce their reliance on credit cards.

If your credit score is good enough, a home-equity loan may be a way to consolidate some of your debts and transfer them from high-interest rates to a lower interest rate. If that isn't an option, then taking on a second job to spur cash flow may be necessary. Also, you can contact creditors to ask for better terms.

Eventually, you may consider using a professional debt-management service, but proceed with caution. Recent government reports have cited a number of suspect practices, such as excessive fees, misleading advertising, inadequate disclosures, and high-pressure sales tactics -- by some large and small credit-counseling services. If you go that route, it will pay to shop around, compare fees, and check out the service with the Better Business Bureau.

For more on managing consumer debt, you can check out the Web site of Bankrate Inc., which is based in North Palm Beach. Go to www.bankrate.com and click on "credit card" in the financial-products box; or call 561-630-2400.

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