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Gas swells use of credit
By Kathy Chu, USA TODAY
As gas prices soar, more people are charging purchases, even as many are having difficulty paying off credit card debt.
It's becoming increasingly common to use plastic at the pump: 70% of gas purchases were paid for with a credit or debit card in the first six months of 2005, compared with 54% last year, the National Association of Convenience Stores says. Most of these purchases are made with credit cards, rather than debit cards, which deduct money from checking accounts.
At the same time, more consumers are falling behind on credit card payments. A record 4.81% of accounts were at least a month behind in the second quarter, compared with 4.76% in the first quarter, the American Bankers Association says. The dollar amount of delinquent credit card debt, however, fell to 3.6% in the second quarter, from 3.76% in the first quarter.
Gas prices are likely the driving factor behind the growth in delinquent accounts, says James Chessen, ABA's chief economist. Low savings rates also mean "that the buffer people have relied on is no longer there," he says.
Meanwhile, credit card issuers are raising minimum payments and switching customers to variable rates that go up with short-term interest rates, says Travis Plunkett of the Consumer Federation of America. This could make it hard for some consumers to make payments.
The number of overdue credit card accounts may not improve much in the third quarter, which ends Friday, because gas prices continue to be high, Chessen says. The average price for a gallon of unleaded regular was $2.811 Wednesday, compared with $1.907 at the same time last year, motorist club AAA says.
Gasoline theft is part of the reason for rising credit card use at the pump. Gas thefts cost convenience stores an estimated $237 million last year ? compared with $112 million the year before ? so more retailers are requiring customers to prepay for fuel.
More of these purchases are being charged to plastic, NACS says, because drivers are reluctant to pay cash and then go back into the store to collect any change after filling the tank.
Consumers also are using cards to pay for gas because they're "trying to displace the pain" until their monthly bill comes, says Jeff Lenard, an NACS spokesman. "They don't want to spend the cash they have."
Discover Financial, which currently has credit card promotions built around everyday purchases such as gas, says it continues to see an increase in fuel charges to its cards.
Visa, which offers more than 460 million credit, debit and prepaid cards, says it's seeing an increase in card spending at gas stations. But Visa says the majority of people use debit, rather than credit, cards for fuel.
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By Kathy Chu, USA TODAY
As gas prices soar, more people are charging purchases, even as many are having difficulty paying off credit card debt.
It's becoming increasingly common to use plastic at the pump: 70% of gas purchases were paid for with a credit or debit card in the first six months of 2005, compared with 54% last year, the National Association of Convenience Stores says. Most of these purchases are made with credit cards, rather than debit cards, which deduct money from checking accounts.
At the same time, more consumers are falling behind on credit card payments. A record 4.81% of accounts were at least a month behind in the second quarter, compared with 4.76% in the first quarter, the American Bankers Association says. The dollar amount of delinquent credit card debt, however, fell to 3.6% in the second quarter, from 3.76% in the first quarter.
Gas prices are likely the driving factor behind the growth in delinquent accounts, says James Chessen, ABA's chief economist. Low savings rates also mean "that the buffer people have relied on is no longer there," he says.
Meanwhile, credit card issuers are raising minimum payments and switching customers to variable rates that go up with short-term interest rates, says Travis Plunkett of the Consumer Federation of America. This could make it hard for some consumers to make payments.
The number of overdue credit card accounts may not improve much in the third quarter, which ends Friday, because gas prices continue to be high, Chessen says. The average price for a gallon of unleaded regular was $2.811 Wednesday, compared with $1.907 at the same time last year, motorist club AAA says.
Gasoline theft is part of the reason for rising credit card use at the pump. Gas thefts cost convenience stores an estimated $237 million last year ? compared with $112 million the year before ? so more retailers are requiring customers to prepay for fuel.
More of these purchases are being charged to plastic, NACS says, because drivers are reluctant to pay cash and then go back into the store to collect any change after filling the tank.
Consumers also are using cards to pay for gas because they're "trying to displace the pain" until their monthly bill comes, says Jeff Lenard, an NACS spokesman. "They don't want to spend the cash they have."
Discover Financial, which currently has credit card promotions built around everyday purchases such as gas, says it continues to see an increase in fuel charges to its cards.
Visa, which offers more than 460 million credit, debit and prepaid cards, says it's seeing an increase in card spending at gas stations. But Visa says the majority of people use debit, rather than credit, cards for fuel.
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