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Credit card users: Not so responsible after all?
NEW YORK — With unemployment high and personal wealth diminished, how was it that strapped consumers were paying down their credit card debt last year? It turns out they probably weren't.
The bulk of 2009's drop in credit card debt instead came because banks were forced to write off loans consumers failed to pay, according to an analysis of Federal Reserve data.
Friday: No Major Economic Releases
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[image: Mortgage Rates] Note: Mortgage rates are from MortgageNewsDaily.com
and are for top tier scenarios.
Friday:
• At 10:00 AM ET, *University of Michig...
1 hour ago
19 comments:
Mark,
I saw plenty of these headlines today! Credit charge offs lower CC debt, no kidding! What's next, written off bad mortgages lowering oustanding mortgage debt? Sure enough even CR likes this one:
http://www.calculatedriskblog.com/2010/03/flow-of-funds-report-mortgage-debt.html
Unreal.
That's absolutely the case, because the cards that are being paid off are the low-balance cards. The higher balance cards are being negotiated/written off.
So if 10 people with CC balances averaging 2.5K are plugging along making their payments, but 4 people with average balances of 35K are getting an average writedown of 18K, your net on your portfolio is REALLY CRAP.
Note to both idiotic Congress Critters and Not-So-Brilliant Bankers - the last thing you want to do is create a situation in which you have to raise rates on CC users. The lower end balances (which would have paid) will now get mad and pay them off without charging more. Your potential defaults just throw up their hands and walk.
What MOM said!
All it takes is reading a few days worth of Mish or The Ticker and it becomes abundantly clear that people are living mortgage-free in their mortgaged homes.
There's no way of knowing I'm sure, but an interesting metric would be the % of non-mortgage payers using their ill-gotten booty to cover credit card payments and how many are "double-dipping" the deadbeat strategy by paying off neither.
We're screwed. (And this posting software is acting all screwy tonight.)
GH,
Indeed it is. We are not screwed yet, no one has figured out that the US is just greece times a million. Keep it on the down low, ok?
GYSC,
Roger that ;)
10-4 big big budddy!
Its a Halo7 glitch, no problem.
Just a thought:
With higher rates and penalties, credit card companies can write-off fabricated money and pay less tax...
Great comments everyone. I would simply add this.
The credit data we are looking at is data that has been averaged. Here's the scary part.
Like roughly 1/3rd of all home owners, I owe nothing on my home. I pay my credit card off each and every month.
Somewhere out there is my financial counterpart.
That person has a lot of mortgage debt and has a lot of credit card debt.
That person is in far worse shape than the averages show. That's the person who we are all counting on. He's the one using the Bernanke's "lifeblood" of our economy.
Who started all this credit card crap in the first place?
Reminds me of that spoiled girl in Willy Wonka (Veruca Salt) singing "I Want It Now!"
Who started all this credit card crap in the first place?
Watchtower,
Who? The same people that decided we should call "debt" credit.
Veruca Salt. Did you know that salt once functioned as money?
http://salt.org.il/money.html
Some parts of the world had a "cow" standard for money too. We're clearly MOOving towards a cow pie standard.
watchtower & mab,
Relax. Take a deep breath. All is not lost. Right now, behind closed doors, our leaders are devising plans to give credit where credit is past due. It's an honor system.
This is America. This is [nearly] free [lunch] market capitalism in action.
So... here's the deal. Buy one pitchfork at full price and you get a burning torch absolutely free! (Just pay separate shipping and processing.) That's not all. Act now and I'll double your order! (You'll pay double though. I'm innovating a new marketing strategy to maximize the profits.)
Kids,
If you read "the Moon is a Harsh Mistress" then you woul of course now that:
TANSTAAFL!
Stag,
Act now and I'll double your order! (You'll pay double though. I'm innovating a new marketing strategy to maximize the profits.)
Awesomely funny. Amazingly amazing. Priceless...or is it pricemore?
Stag,
I second mab's motion.
That (your) post is absolutely priceless!!
G.H.,
Priceless? Hmmm. I wonder if I could bundle it into an SMLMV (Structured Multi-Level Marketing Vehicle) and resell it. If you know two Amway friends, and they each know two Amway friends, and so on, and so on, then just think of the possibilities!!
I better insure it first though. I figure SDS (Sarcasm Default Swaps) should work. I'm always defaulting to sarcasm around here anyway, or so it seems.
"If you know two Amway friends, and they each know two Amway friends, and so on, and so on, then just think of the possibilities!!"
Here are a few of the possibilities:
1.) Peddle "motivational" materials until the cows come home and sprinkle in god talk as well, just for good (or is it god) measure.
2.) Align yourself with other god talkers such as Charles Stanley, Zig Ziglar, and Dexter Yager.
3.) Purchase assets such as islands in the Caribbean and Patrick Uwing and Horace Grant and Grant Hill and Vince Carter.
4.) Lose the money you've happily gained and live happily ever after.
G.H.,
I just hope I could Madoff with the profits. Oops. Freudian slip!
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