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On the Verge of a US Credit Card Debt Crisis

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PullingMeSoftly
Valued Contributor

On the Verge of a US Credit Card Debt Crisis

This article discusses 8 signs of an imminent debt crisis as indicated by the U.S. credit card market.

 

The TLDR:

  • The total amount of credit card debt in the United States has surpassed the one trillion dollar mark and is now at the highest level ever recorded.
  • The average rate of interest on credit card balances has now risen to a new all-time record high of 20.63 percent.
  • 47 percent of all U.S. cardholders are now carrying balances from month to month.
  • The average credit card debt level in the United States continues to grow.
  • Most Americans are not running up credit card debt because they are making frivolous purchases.
  • The number of credit card delinquencies in the U.S. has surged dramatically over the past two years.
  • One recent survey discovered that many Americans that actually use personal loans to consolidate credit card debt end up quickly running up new credit card balances close to their previous levels.
  • At a time when economic conditions are slowing down all over the nation, Americans are becoming increasingly dependent on their credit cards.





Message 1 of 22
21 REPLIES 21
Anonymalous
Valued Contributor

Re: On the Verge of a US Credit Card Debt Crisis

Good summary. I think the absolute debt level or even the number of defaults aren't particularly worrying in themselves (they're just a continuation of pre-pandemic trends), but the use of credit for regular purchases and that bit about racking up even more debt after consolidating it are. Rising inflation due to the massive money printing has made basic expenses too expensive for ordinary people so they're resorting to credit, which leads to an unsustainable spiral.

Message 2 of 22
JoeRockhead
Senior Contributor

Re: On the Verge of a US Credit Card Debt Crisis

In addition to all this, especially the part about racking up more CC debt after consolidating the debt they had already racked up. I read an article not long ago talking about how a notable number of people are also taking money out of their 401k to cover expenses and credit card debt and not paying it back. Not surprising that there are higher default rates as many are finding out the hard way that you just can't sustain the practice of robbing Peter to pay Paul. Combined with irresponsible behavior, you'll run face first into that brick wall sooner or later.

Message 3 of 22
CreditCuriosity
Moderator Emeritus

Re: On the Verge of a US Credit Card Debt Crisis

As mentioned previously I think when SL payments start back in October going to see a huge amount of defaults shortly after.  That is just my take personally.  Inflation is real and not tame by any means and wages for most people aren't keeping up with inflation and something will have to give.  Just my take on it.  Hopefully gov't doesn't try to intervene with this like so many other things although they certainly are trying to forgive as much as possible.  Big mess on our hands coming up in so many way imho.

Message 4 of 22
CreditCuriosity
Moderator Emeritus

Re: On the Verge of a US Credit Card Debt Crisis

Just heard on news charge off rate is cloes to all time high on CC at 7.5%

Message 5 of 22
SouthJamaica
Mega Contributor

Re: On the Verge of a US Credit Card Debt Crisis


@CreditCuriosity wrote:

As mentioned previously I think when SL payments start back in October going to see a huge amount of defaults shortly after.  That is just my take personally.  Inflation is real and not tame by any means and wages for most people aren't keeping up with inflation and something will have to give.  Just my take on it.  Hopefully gov't doesn't try to intervene with this like so many other things although they certainly are trying to forgive as much as possible.  Big mess on our hands coming up in so many way imho.


I hope the government does try to intervene, since it basically caused the crisis by precipitously raising interest rates without a good reason for doing so.


Total revolving limits 710800 (590300 reporting) FICO 8: EQ 712 TU 710 EX 710

Message 6 of 22
Anonymalous
Valued Contributor

Re: On the Verge of a US Credit Card Debt Crisis


@SouthJamaica wrote:

@CreditCuriosity wrote:

As mentioned previously I think when SL payments start back in October going to see a huge amount of defaults shortly after.  That is just my take personally.  Inflation is real and not tame by any means and wages for most people aren't keeping up with inflation and something will have to give.  Just my take on it.  Hopefully gov't doesn't try to intervene with this like so many other things although they certainly are trying to forgive as much as possible.  Big mess on our hands coming up in so many way imho.


I hope the government does try to intervene, since it basically caused the crisis by precipitously raising interest rates without a good reason for doing so.


It's the only way to fight inflation.

 

The root cause isn't price inflation or the rise in interest rates. It's monetary inflation. The current trap is the inevitable result, and there's no good way out.

Message 7 of 22
CreditCuriosity
Moderator Emeritus

Re: On the Verge of a US Credit Card Debt Crisis


@Anonymalous wrote:

@SouthJamaica wrote:

@CreditCuriosity wrote:

As mentioned previously I think when SL payments start back in October going to see a huge amount of defaults shortly after.  That is just my take personally.  Inflation is real and not tame by any means and wages for most people aren't keeping up with inflation and something will have to give.  Just my take on it.  Hopefully gov't doesn't try to intervene with this like so many other things although they certainly are trying to forgive as much as possible.  Big mess on our hands coming up in so many way imho.


I hope the government does try to intervene, since it basically caused the crisis by precipitously raising interest rates without a good reason for doing so.


It's the only way to fight inflation.

 

The root cause isn't price inflation or the rise in interest rates. It's monetary inflation. The current trap is the inevitable result, and there's no good way out.


Correct the gov't caused this either party/admin. pick one by over spending.  Got to tame it some how and raising rates is the only way.  They need a lesson on MF about overspending and the troubles it gets you into being the gov't

Message 8 of 22
Slabenstein
Valued Contributor

Re: On the Verge of a US Credit Card Debt Crisis

Pretty good movie.  I liked the parts with Meatloaf.


Message 9 of 22
SouthJamaica
Mega Contributor

Re: On the Verge of a US Credit Card Debt Crisis


@Anonymalous wrote:

@SouthJamaica wrote:

@CreditCuriosity wrote:

As mentioned previously I think when SL payments start back in October going to see a huge amount of defaults shortly after.  That is just my take personally.  Inflation is real and not tame by any means and wages for most people aren't keeping up with inflation and something will have to give.  Just my take on it.  Hopefully gov't doesn't try to intervene with this like so many other things although they certainly are trying to forgive as much as possible.  Big mess on our hands coming up in so many way imho.


I hope the government does try to intervene, since it basically caused the crisis by precipitously raising interest rates without a good reason for doing so.


It's the only way to fight inflation.

 

The root cause isn't price inflation or the rise in interest rates. It's monetary inflation. The current trap is the inevitable result, and there's no good way out.


Actually the inflation this time was due to (a) price gouging and (b) supply chain breakdowns. The Fed raising interest rates does nothing to solve either of those.


Total revolving limits 710800 (590300 reporting) FICO 8: EQ 712 TU 710 EX 710

Message 10 of 22
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