Credit card debt the next bubble

[Texashiker]

2009 - credit card debt went down, I do not have exact numbers
2010 - CC debt increased by $9 billion
2011 - estimates put the increased CC debt at around $54 billion by the end of 2011

As a whole, Americans now have roughly $772 billion in outstanding credit card balances

http://moneyland.time.com/2011/09/14/54-billion-closer-to-our-next-financial-crisis/

I wonder if the increased CC debt is from people not being able to pay their basic bills, and using the CC as a crutch.

Or, is the increased debt from people trying to live well beyond their means?

There is a difference in someone using a CC to buy food for their family, and someone buying a new flat screen TV just because they want one.

First came the housing crash and the banks had to be bailed out.

Will the banks claim there is a credit card crash and need to be bailed out again?

 

[Gonad the Barbarian]

Basic bills and expenses ARE well beyond many people's means. Been that way for about 30 years and keeps getting worse. That Xbox or big screen TV isn't the difference between having health coverage, getting a secondary education, etc. Being too poor for those things that really matter probably sucks just a little less with a nice TV.

This isn't our next financial crisis, consumers' maxed credit is at the core of our current one.

 

[rcpratt]

Posting in a TH credit card thread.

 

[nageov3t]

step 1: stop paying off credit card debt.
step 2: ???
step 3: profit!

 

[allthatisman]

This is the first story in the last couple of years that has said that credit card usage is going up... It seems to me that all I've read is that it's the one type of borrowing that has gone down...

edit: here is one article I found...

http://www.marketwatch.com/story/cr...t-2010-according-to-creditkarmacom-2011-09-14

And another...
http://www.bloomberg.com/news/2011-...12-billion-in-july-twice-amount-forecast.html

Revolving debt like credit cards is down, while student and auto loans are up.

 

[woolfe9999]

Basic bills and expenses ARE well beyond many people's means. Been that way for about 30 years and keeps getting worse. That Xbox or big screen TV isn't the difference between having health coverage, getting a secondary education, etc. Being too poor for those things that really matter probably sucks just a little less with a nice TV.

This isn't our next financial crisis, consumers' maxed credit is at the core of our current one.

This, and it's easily deducible from the economic context. The article says:

After a couple years of austerity, we’re again racking up credit card debt at an alarming clip.

Yet we know that overall consumer spending is NOT up to any significant degree from last year. Translation: people are spending with credit instead of cash because they don't have the cash any more. People out of work are running out of whatever savings they had and they're switching to credit to get by. If consumer spending was increasing at the same time as credit card debt, it would suggest that people are buying more than necessities, but that isn't the case.

- wolf

 

[Texashiker]

People out of work are running out of whatever savings they had and they're switching to credit to get by.

That is what I am worried about.

I also wonder how many people have exhausted their unemployment benefits and are now living on credit.

 

[Ausm]

This isn't our next financial crisis, consumers' maxed credit is at the core of our current one.

This I agree with alot of people had the same financial advisors as Congress did running up the balance on Nations credit card.

 

[werepossum]

This, and it's easily deducible from the economic context. The article says:



Yet we know that overall consumer spending is NOT up to any significant degree from last year. Translation: people are spending with credit instead of cash because they don't have the cash any more. People out of work are running out of whatever savings they had and they're switching to credit to get by. If consumer spending was increasing at the same time as credit card debt, it would suggest that people are buying more than necessities, but that isn't the case.

- wolf

Probably right, with so many people out of work or getting less money. Or maybe it's also that people are saving cash. Many people who doubt the security of their jobs may well think that saving cash is a wise thing right now. (I of course don't agree because of the insane interest one would have to pay, but scared people don't necessarily make good decisions.) But I know a few people who have one or both workers unemployed and/or on greatly reduced hours. They aren't people who are likely to have significant savings, so I imagine they are using plastic to pay their bills and buy groceries.

LOL at Gonad for attempting to justify people buying a "nice TV" on credit because they can't afford basic bills and expenses. Gotta love our entitlement mentality.

And I don't agree with Texashiker all that often, but this seems like a pretty valid issue to me. Two pretty valid issues actually, the actual credit card debt (and its likely effect on our economy and credit system) and the likelihood of yet another bank bailout when these credit cards can't be paid back. A lot of the people who are using plastic for necessities will probably end up in bankruptcy, and I can't imagine that paying back credit card debt (considering the confiscatory interest rates) are going to be high on their list of priorities once they recover.

 

[JS80]

I wonder how much of that is FWF arbitrage balance

 

[Gonad the Barbarian]

LOL at Gonad for attempting to justify people buying a "nice TV" on credit because they can't afford basic bills and expenses. Gotta love our entitlement mentality.

You entitlement whiners might have a point if these folks were buying boats or some such instead of relatively minor one-shot expenses or things like refrigerators, microwaves, and computers that likely save them more money over the long term than cost.

 

[werepossum]

You entitlement whiners might have a point if these folks were buying boats or some such instead of relatively minor one-shot expenses or things like refrigerators, microwaves, and computers that likely save them more money over the long term than cost.

To people living on credit cards a big screen or other "nice" television is certainly not a relatively minor one-shot expense.

 

[ElFenix]

A lot of the people who are using plastic for necessities will probably end up in bankruptcy, and I can't imagine that paying back credit card debt (considering the confiscatory interest rates) are going to be high on their list of priorities once they recover.

assuming they get a discharge in bankruptcy why would they pay the credit card debt?

 

[Gonad the Barbarian]

To people living on credit cards a big screen or other "nice" television is certainly not a relatively minor one-shot expense.

Say a $2,000, depreciated over the 5 year or so life of the TV, works out to about $33 dollars a month. Add the 20% or so interest and round it to $40. WTF else is $40 a month going to get you? The audacity of people who probably work just as hard as folks who make many times more than they do and get health coverage thinking they are entitled to a nice TV. Or the ability to store and prepare food. Or anything else you entitlement whiners whine about. Like I said, when they buy a boat or something you'll have a point.

 

[Throckmorton]

2009 - credit card debt went down, I do not have exact numbers
2010 - CC debt increased by $9 billion
2011 - estimates put the increased CC debt at around $54 billion by the end of 2011

As a whole, Americans now have roughly $772 billion in outstanding credit card balances

http://moneyland.time.com/2011/09/14/54-billion-closer-to-our-next-financial-crisis/

I wonder if the increased CC debt is from people not being able to pay their basic bills, and using the CC as a crutch.

Or, is the increased debt from people trying to live well beyond their means?

There is a difference in someone using a CC to buy food for their family, and someone buying a new flat screen TV just because they want one.

First came the housing crash and the banks had to be bailed out.

Will the banks claim there is a credit card crash and need to be bailed out again?

Since the beginning of 2010 I went from $0 CC debt to $7000. That's what happens when your salary doesn't meet the cost of living.

 

[werepossum]

assuming they get a discharge in bankruptcy why would they pay the credit card debt?

Some people as a moral issue pay their bills even though they have been legally discharged. I doubt this often applies to credit card companies though, as they have likely paid in excess of their actual charges unless they intentionally ran them up.

Say a $2,000, depreciated over the 5 year or so life of the TV, works out to about $33 dollars a month. Add the 20% or so interest and round it to $40. WTF else is $40 a month going to get you? The audacity of people who probably work just as hard as folks who make many times more than they do and get health coverage thinking they are entitled to a nice TV. Or the ability to store and prepare food. Or anything else you entitlement whiners whine about. Like I said, when they buy a boat or something you'll have a point.

$40 a month gets you $40 a month of not borrowing money you can't pay back. One either gets that as a moral issue, or one does not.

 

[werepossum]

Since the beginning of 2010 I went from $0 CC debt to $7000. That's what happens when your salary doesn't meet the cost of living.

I suspect this is fairly common, as Wolf was saying.

Time to get a roommate, dude.

 

[Texashiker]

assuming they get a discharge in bankruptcy why would they pay the credit card debt?

Because it is the honorable thing to do.

Since the beginning of 2010 I went from $0 CC debt to $7000. That's what happens when your salary doesn't meet the cost of living.

Time to find a lower cost of living.

 

[Gonad the Barbarian]

$40 a month gets you $40 a month of not borrowing money you can't pay back. One either gets that as a moral issue, or one does not.

Don't you DARE try to invoke morality after all the people and policies you support did to intentionally create this situation.

 

[WhipperSnapper]

Just wait until the student loan bubble bursts. College tuition keeps going up and up, but the employment value of a college degree keeps going down. As more and more college graduates end up unemployed or underemployed-out-of-field, they won't be able to pay off their student loan debts.

 

[Texashiker]

As more and more college graduates end up unemployed or underemployed-out-of-field, they won't be able to pay off their student loan debts.

My wife and I know this guy who got a degree in criminal justice, I think it was a 4 year degree. Instead of being a cop on the street, he wanted to work in probation office.

The guy could not find a job. He ended up buying a small business here in town and working for himself.

Before he bought the business he was working at a fast food place.

4 year degree in criminal justice, and working in fast food,,, think about that.

If the guy was willing to move to somewhere like Houston or Dallas he might have been able to find a job. But he would have had to move away from his family, and not everyone wants to live in a big city.

 

[rudder]

Time to buy some new electronics on some new credit cards... I smell a bailout!

 

[dank69]

My wife and I know this guy who got a degree in criminal justice, I think it was a 4 year degree. Instead of being a cop on the street, he wanted to work in probation office.

The guy could not find a job. He ended up buying a small business here in town and working for himself.

Before he bought the business he was working at a fast food place.

4 year degree in criminal justice, and working in fast food,,, think about that.

If the guy was willing to move to somewhere like Houston or Dallas he might have been able to find a job. But he would have had to move away from his family, and not everyone wants to live in a big city.

If you want to live in a specific area, it is up to you, the individual, to acquire a degree for a job that is in demand in that area. You can't just go to school for whatever you want and expect a job to be waiting for you when you graduate.

 

[ElFenix]

Because it is the honorable thing to do.

honor is a two way street and the credit card companies have none.

i get wanting to pay your doctor after getting your discharge. i don't get wanting to pay your credit card companies. especially since many people have paid well more than the principal amount.

 

[foghorn67]

My wife and I know this guy who got a degree in criminal justice, I think it was a 4 year degree. Instead of being a cop on the street, he wanted to work in probation office.

The guy could not find a job. He ended up buying a small business here in town and working for himself.

Before he bought the business he was working at a fast food place.

4 year degree in criminal justice, and working in fast food,,, think about that.

If the guy was willing to move to somewhere like Houston or Dallas he might have been able to find a job. But he would have had to move away from his family, and not everyone wants to live in a big city.

I seriously think you are retarded.
You constantly use anecdotal evidence or personal Walmart stories to formulate opinions on the nations issues.
As as said before. Going to college based on a dumb decision won't make you smart.