topic Re: Consumers paying off debt? Not likely. in Credit in the News

Consumers paying off debt? Not likely.

haulingthescoreup — Sat, 16 Oct 2010 16:17:45 GMT

Chuck Jaffe: Consumers paying off debt? Not likely.

“Look at the charge-off numbers for the banks and they are almost dollar-for-dollar the decline in consumer debt,” said Greg McBride, senior financial analyst for Bankrate.com. “So you are getting headlines about how much better off consumers are, and how they are paying down their debts, but that’s not what’s really happening.”

It’s an economic sleight of hand that should feel pretty familiar. It’s akin to statistics showing that unemployment is going down, when the numbers exclude the chronically unemployed who have been out of work for so long that they drop out of the active work force. They’re not working, but the overall statistics look better with them on the outside.

So other than in individual instances, there doesn't seem to be a significant trend in Americans paying off their debt. It's just being charged-off, meaning that they still owe it (and get ready for collections), but it no longer shows on the accounts receivable books.

Re: Consumers paying off debt? Not likely.

athensguy — Wed, 10 Nov 2010 01:29:06 GMT

I'm even more underwater than earlier, but I've still paid down a good bit. I'm currently working on bulking up the E-fund, but after I get that to a prescribed level, I'll get back to paying down my overall debt by about $1K extra each month. Getting mortgage debt to 78% so MIP goes away is the first goal after filling the E-fund. After that, it's the rest of SL debt.

Re: Consumers paying off debt? Not likely.

Anonymous — Wed, 10 Nov 2010 21:26:32 GMT

How depressing! Next you're going to tell me there isn't a Santa Claus, either!

I've read a ton of articles about credit card debt levels dropping, and had a nice fuzzy picture in my head of people diligently saving and chopping away at their balances.

Re: Consumers paying off debt? Not likely.

Anonymous — Thu, 11 Nov 2010 18:23:52 GMT

Hopefully they are still becoming more educated about the debt! I would assume that as unemployment numbers really go up again, the amount of real savings will also increase but otherwise it makes perfect sense that consumers can't pay off debt if they have no money.

That's the problem with statistics - it can be manipulated to give any picture desired and that might not be a real reflection but a fun house mirror.

Personally, I'm not paying off my debt right now - but of course I only have two debts - the SL that's consolidated and deferred and the mortgage that I'm paying on time with a little extra but I'm sure that I'm not their target ;-)

But good article choice, it's important to continue to highlight the differences in reality and happy number world.

Re: Consumers paying off debt? Not likely.

Anonymous — Wed, 08 Dec 2010 06:32:00 GMT

I disagree with the original post. I think people are paying down debt but the institutions don't want the rest of us to get wind of it. The numbers I have seen show that debt has decreased and the number of people making late payments have also decreased. In my view people are paying down their debt and on time. this is for CC debt no telling what the other products are doing. The charge offs can be on bad subprime bank loans. Also, I saw an article which stated that the number of credit card holders have decreased by 8 million. I don't think banks are just canceling these people we all have caught wind to their manipulation. We are smarter consumers now.

Re: Consumers paying off debt? Not likely.

haulingthescoreup — Wed, 08 Dec 2010 15:55:47 GMT

Well, if you look at the original article, it points out that the rise in charge-offs (an accounting mechanism where the receivable debt is taken off the books) pretty much matches the reduction in consumer debt. It looks like paper magic to me.

I completely agree that many people are paying down their debt. But there are an awful lot of unemployed and underemployed people out there, and they're doing well to just maintain the debt level they have, and many are going deeper into debt.

And many people have just cut up their cards on their own initiative. I don't recommend it (you don't have to have debt, just because you have credit), but I certainly understand it.