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Americans are suddenly defaulting on their credit cards

Super Contributor

Re: Americans are suddenly defaulting on their credit cards

Discover was in the news for this as wellSmiley Wink
Moderator

Re: Interesting...CC defaults up significantly

Seems like MSN is late to the party as were talking about this back in April, FWIW I saw the increase in defaults starting in 11/2016 in my Lending Club account (I was soley in the 3 bottom tranches) though I wasn't smart enough to think this was a full market issue.

 

I'm not certain what the data suggests really as it's still well within historical norms as the average is like 5% historically looking at one of their other charts; though of course the spike is what they're looking at... that said based on my April / May LC results I suspect Q2 Synchrony isn't going to be much better. 

 

I don't think the sky is falling yet, and the wave of CLD's by Cap 1 weren't taken against subprime borrowers or risky bets, the ones I saw at least were easily explainable by simple capital reallocation... CLDing unused 35K lines to 10K, like why did they wait so long?

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Frequent Contributor

Re: Americans are suddenly defaulting on their credit cards

This is what happens when credit is extended for people with shabby credit profiles. Many think credit cards as money in the wallet not another type of loan!! Also you need blame financial institutions such as synchrony when they were handing out 25K CLs like candy. Its all about responsible use of credit which is good for the entire credit card demography!!
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Moderator

Re: Americans are suddenly defaulting on their credit cards


maestro07 wrote:
This is what happens when credit is extended for people with shabby credit profiles. Many think credit cards as money in the wallet not another type of loan!! Also you need blame financial institutions such as synchrony when they were handing out 25K CLs like candy. Its all about responsible use of credit which is good for the entire credit card demography!!

Meh, shabby profile doesn't mean they spend outside their means or are going to think CC's are money in pocket; my file has been shabby by definition for my entire life, still is actually on all three bureaus.

 

Since none of the articles actually mentioned the size of the problem, this is from Cap 1's 10Q:

 

   Q1 2017  Q1 2016   Variance
Net charge-offs
 
$1,510
 
$1,178
 
 28%
Net charge-off rate(11)
 
2.50%
 
 2.08%
 
42 bps
 

That includes more than just credit cards but that's not the sky is falling losses and C1 expected it looking at their charge off provisions, but here's an interesting thing

 

  
3/2017
 
12/2016
  
30+ day performing delinquency rate
 
3.68%
 
3.91%
 
(23)bps
30+ day delinquency rate
 
3.71
 
3.94
 
(23)

 

Late payments went down Q1 2017 compared to Q4 2016.

 

Charge offs are by definition around 6 months lagging or more 30D deliquencies so this stuff went delinquent sometime before  September.

 

I care a lot more about recent metrics than prior losses, and a 6% swing in the deliquency rate in the performing direction, seems like a good thing.

 

Had I been smarter, I would've used this data to manage my LC portfolio but oh well, live and learn if I ever try the LC or other P2P lending experiment again.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
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Established Contributor

Re: Americans are suddenly defaulting on their credit cards


pipeguy wrote:

Just got ready to post this story - ya beat me to it Smiley Sad

 

Probably explains the AA and CLD's folks are experiencing as of late - thankfully I have not had and AA or CLD on any of my accounts. 


Smiley Wink Yep, pipeguy, I agree that this begins to answer the questions, especially Cap1, why they're taking AAs to lower their risks. I'm really glad none of these cards are in my portfolio.



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Moderator

Re: Americans are suddenly defaulting on their credit cards

I have been letting balances rise and am hording the cash converted into metals. I have always had a plan should the economy start to go off its track.

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Valued Contributor

Re: Americans are suddenly defaulting on their credit cards


gdale6 wrote:

I have been letting balances rise and am hording the cash converted into metals. I have always had a plan should the economy start to go off its track.


Ok - it looks like you are targeting one of the five investments, metals, recommended in "The Death of Money" by James Rickards. Key point is it should be in physical form (coins or bullion). Industrial metals not included in the portfolio. The other four investments - per the book - are:

 - Land (either undeveloped in a prime location or with agricultural potential). NOT land with structures.

 - Fine art including the broader range of collectibles such as true classic cars. Low weight portable collectibles are best per James because they are portable.

 - Alternative funds (natural resources, water, energy). Maybe a wind or solar energy farm. Perhaps a water desalination plant.

 - Cash (this is needed and serves a needed purpose at least until a calamity occurs)

 

I'm not sold on what James Rickards advocates but, I do believe undeveloped and farm land has long lasting staying power regardless of money devaluation. Land can be leased to those that farm - no need to run a farming operation on it directly.  By brother in law has a house on 64 acres of land on the edge of urbanization. He leases 40 areas to a farmer. He paid under $2000/acre 20 years ago and could get upwards of $20,000/acre today based on nearby land sales to developers. Nice low taxes due to farming.

Fico 8: .......EQ 850 TU 850 EX 850 (3/2017)
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Contributor

Re: Americans are suddenly defaulting on their credit cards

I would say that people are over extended.  The chapter 7 bankruptcy market has grown and once the credit is cleared, it is like cards cards everywhere without the income to support these various cards which leads to the vicious cycle of not being able to pay.

Moderator

Re: Americans are suddenly defaulting on their credit cards


tricie17 wrote:

I would say that people are over extended.  The chapter 7 bankruptcy market has grown and once the credit is cleared, it is like cards cards everywhere without the income to support these various cards which leads to the vicious cycle of not being able to pay.


We don't appear to be doing that badly on that front?  This is consumer data 

 

http://www.creditslips.org/.a/6a00d8341cf9b753ef01b7c8c653b2970b-popup

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


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Valued Contributor

Re: Americans are suddenly defaulting on their credit cards

At the end of the day it''s not how "the people" are doing ... it's how the government, banking industry and investment community are doing. It's hard to maintain a ship with gaping holes a float indefinately - what happened to paying DOWN debt?

 

Here is another deregulation land mine - Derivatives anyone? Let's bundle and spin some BS.

 

Fico 8: .......EQ 850 TU 850 EX 850 (3/2017)
Fico 9: .......EQ 850 TU 850 EX 850 (3/2017)
Fico 4 .....:. EQ 804 TU 823 EX 830 (3/2017) EX Fico 98: 839 (3/2017)
VS 3.0:...... EQ 832 TU 832 EX 832 (3/2017)
Fico 8 BC:. EQ 887 TU 899 EX 900 (3/2017)
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950 (4/2017)