Unpaid credit cards bedevil Americans

Defensor · 12-23-2007, 06:35 PM

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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.

Serious delinquencies also are up sharply: Some of the nation's biggest lenders � including Advanta, GE Money Bank and HSBC � reported increases of 50 percent or more in the value of accounts that were at least 90 days delinquent when compared with the same period a year ago.

The AP analyzed data representing about 325 million individual accounts held in trusts that were created by credit card issuers in order to sell the debt to investors � similar to how many banks packaged and sold subprime mortgage loans. Together, they represent about 45 percent of the $920 billion the Federal Reserve counts as credit card debt owed by Americans.

Until recently, credit card default rates had been running close to record lows, providing one of the few profit growth areas for the nation's banks, which continue to flood Americans' mailboxes with billions of letters monthly offering easy sign-ups for new plastic.

Even after the recent spike in bad loans, the credit card business is still quite lucrative, thanks to interest rates that can run as high as 36 percent, plus late fees and other penalties.

But what is coming into sharper focus from the detailed monthly SEC filings from the trusts is a snapshot of the worrisome state of Americans' ability to juggle growing and expensive credit card debt.

...

"The desires of consumers to want, want, want, spend, spend, spend � it's the fabric of our nation," said Howard Dvorkin, founder of Consolidated Credit Counseling Services in Fort Lauderdale, Fla., which has advised more than 5 million people in debt. "But you always have to pay the piper, and that can be a very painful process."

Americans' love affair with debt and consumerism is finally coming back to haunt them. When will we learn as a nation to live within our means?

ilikeGW · 12-23-2007, 07:05 PM

I hate paying them every month. Sure, it's fun when you first get them, it seems like free money, then when you pay back what you've spent, and use them again, you're just using your own money!! That is SICK!

johnflesh · 12-23-2007, 07:22 PM

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Originally Posted by ilikeGW

I hate paying them every month. Sure, it's fun when you first get them, it seems like free money, then when you pay back what you've spent, and use them again, you're just using your own money!! That is SICK!

You don't know how well you described it. Thats it nail on the head, in a nutshell, the real deal, all that. Aside from interest.

At 20 I got my first card at 15% and that was enough to give me the full understanding of how they work.

A credit card is instant debt with a fee... Debt with a fee?? well sign me up!! The only excuse is that it is easier than dealing with cash and thus worth the fee. First rule of managing money is not letting someone else do it, but learning how to do it. I believe second rule is avoiding debt.

The idea that credit cards can be a bad deal was exemplified when I visited a friend of mine who was fairly fresh out of the military from Iraq about a year ago. His place was very nice and well put together, with nice furniture and lighting, all the electronic equipment a single guy would need, pretty well built stuff that would last him a good while. To me he was doing great until he told me he officially didn't own any single piece of it until he paid it off. Which with interest would equal paying it off 1 and 1/2 times before he owned it, collectively. He thinks its no big deal and I suppose I envy him for being able to not see it as a big deal... lets just say people close to him hopes he never loses his job.

I figure if you got the money, what the hell, but as most economic reports come out about the common American, they don't have the money and thus try to live outside their means and get caught.

Credit companies make it easy to get credit cards for even people with not so hot credit, but its more so the responsibility of the consumer to not be foolish about spending.

Morpheus · 12-23-2007, 08:04 PM

Anyone see the movie Maxed Out? Good documentary...

michaelr · 12-23-2007, 08:41 PM

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Originally Posted by Morpheus

Anyone see the movie Maxed Out? Good documentary...

Im not sure but it sounds familier.

Any way, this administration along with the banks made it impossible to bankrupt on your credit card. Now we have millions losing their homes, having to declare bankruptcy, and still stuck with what could be 10s of thousands in debt. Try to rent, in my state they check you credit background and renting is not an option.

Roshi · 12-23-2007, 09:13 PM

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Originally Posted by michaelr

Im not sure but it sounds familier.

Any way, this administration along with the banks made it impossible to bankrupt on your credit card. Now we have millions losing their homes, having to declare bankruptcy, and still stuck with what could be 10s of thousands in debt. Try to rent, in my state they check you credit background and renting is not an option.

Ahh yes, let's blame the government and the banks for people's irresponsibility

michaelr · 12-23-2007, 09:21 PM

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Originally Posted by Roshi

Ahh yes, let's blame the government and the banks for people's irresponsibility

The banks and the gov are are at fault here. The credit card companies will increase the rates if you pay up your cards or if you miss a payment. The government should have never stepped in on the bankruptcy issue. The credit card companies have been trying to get them to pass this law for damn near ever. If you can bankrupt you other bills, then why not your credit cards? We do have some protections in this country, maybe you do not know about or understand them.

I am not sure if you are being sarcastic or not but either way many people think your statement has merit, to some extent I also do.

Roshi · 12-23-2007, 09:26 PM

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Originally Posted by michaelr

The banks and the gov are are at fault here. The credit card companies will increase the rates if you pay up your cards or if you miss a payment. The government should have never stepped in on the bankruptcy issue. The credit card companies have been trying to get them to pass this law for damn near ever. If you can bankrupt you other bills, then why not your credit cards? We do have some protections in this country, maybe you do not know about or understand them.

I am not sure if you are being sarcastic or not but either way many people think your statement has merit, to some extent I also do.

The government is at fault? That's ridiculous. I don't know about government protection? This has NOTHING to do with protection. You're at fault for spending money you don't have. The government should not need to wipe your butt for you. I'm pretty sure you know how to do it yourself.

The bank will up the rate? Oh well. Why don't you try reading the fine print?

Thus is life. And I have zero sympathy if you're stupid enough to spend thousands of dollars you don't have.

michaelr · 12-23-2007, 09:38 PM

Quote:

Originally Posted by Roshi

The government is at fault? That's ridiculous. I don't know about government protection? This has NOTHING to do with protection. You're at fault for spending money you don't have. The government should not need to wipe your butt for you. I'm pretty sure you know how to do it yourself.

The bank will up the rate? Oh well. Why don't you try reading the fine print?

Thus is life. And I have zero sympathy if you're stupid enough to spend thousands of dollars you don't have.

As I said to some extent I agree, but with costs of living people will spend beyond their means. Right now there is a trend to pay off the cards and loose the home. Before you tell me about the housing foreclosures and how thats the common idiots fault, I will tell you that over 75% of the foreclosures are to upper and middle class citizens. Maybe if the government would stop lying about little things like the inflation rate, people can make better decisions. Also there are a lot of these people who collected this debt before their jobs were lost due to outsourcing.

You make it sound like millions of homeowners and middle class are to stupid to tie their own shoes, your wrong and their should be protections, and in fact their are except for credit cards. Here is an article for you to ponder on....Tent city in suburbs is cost of home crisis

The article depict E. LA, I would expect that from the media but the reality is that it is happening everywhere.

Roshi · 12-23-2007, 09:51 PM

Quote:

Originally Posted by michaelr

As I said to some extent I agree, but with costs of living people will spend beyond their means. Right now there is a trend to pay off the cards and loose the home. Before you tell me about the housing foreclosures and how thats the common idiots fault, I will tell you that over 75% of the foreclosures are to upper and middle class citizens. Maybe if the government would stop lying about little things like the inflation rate, people can make better decisions. Also there are a lot of these people who collected this debt before their jobs were lost due to outsourcing.

You make it sound like millions of homeowners and middle class are to stupid to tie their own shoes, your wrong and their should be protections, and in fact their are except for credit cards. Here is an article for you to ponder on....Tent city in suburbs is cost of home crisis

The article depict E. LA, I would expect that from the media but the reality is that it is happening everywhere.

I guess it's a good thing I'm against outsourcing and say the US should be self-dependent huh? :P

I work part time in nearly minimum wage (while I go to college). I could easily support an apartment, a car payment, insurance, and all of the necessities if I went full time. So I'm really getting annoyed with all of the nonsense excuses people throw out.

And there is a GIANT difference between losing your job due to something out of your control (which would warrant government intervention like bankruptcy), and simply spending money you don't have (like college kids do).

And as to the story you posted. One guy is receiving SS and claims rent is to high for an apartment. Here's an idea. MOVE TO A NEW CITY! The guy is in CALIFORNIA for Christs sakes, what do you expect? While it isn't much, he's obviously receiving some sort of cash flow with no overhead. Bus tickets were not very expensive last time I checked. And I know it's doable as I've dealt with customer's who are on SS.

And as for the mortgage payments. People are obviously buying houses they cannot originally afford. No one to blame but yourself there.... Not that this is fact, but in my line of work I've processed financing for people making 6 figures before. I see many of them get denied. Meaning they spend more than they make (just like the poor).

Have you ever listened to finance tv or radio shows? I do really have to doubt human intelligence.You have people who cannot afford rent because they are spending 500 dollars a month on car payments. I really have to wonder how many people of the "75%" that you claim are doing things like that.