This issue, in my opinion, will be a huge story in the upcoming year.
Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come.
An Associated Press analysis of financial data from the country's largest card issuers also found that the greatest rise was among accounts more than 90 days in arrears.
Experts say these signs of the deterioration of finances of many households are partly a byproduct of the subprime mortgage crisis and could spell more trouble ahead for an already sputtering economy.
"Debt eventually leaks into other areas, whether it starts with the mortgage and goes to the credit card or vice versa," said Cliff Tan, a visiting scholar at Stanford University and an expert on credit risk. "We're starting to see leaks now."
The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.
At the same time, defaults — when lenders essentially give up hope of ever being repaid and write off the debt — rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.
3 comments:
You are right, this will be a key issue in 2008. I believe the underlying cause of credit card debt is the misleading interest rates.
Credit Companies do not disclose the payoff date in their monthly billing. If credit card companies did just that one thing then people would know early on how insidious their debt really is and would make a better effort to use less credit and pay off existing credit.
Also, when one pays only the monthly minimum payment the actual interest rate is four to five times higher than the quoted rate. This is another form of non-disclosure. Since non-disclosure has been a primal ingredient in the current credit-card debt issue, banks should allow people to pay off their current debts with no more assessed interest.
As a compromise the banks could possibly ask for a slightly larger monthly minimum payment, but apply it ALL towards the principle. Isn't that better than just writing off the debt and using it as a reason to raise the rates on those still trying to pay off their own debt?
http://www.credit-card-cap.com
http://www.credit-protector.com
Your observations are spot on.
BTW- Found your sites very informative. Thanks!
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