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On the Verge of a US Credit Card Debt Crisis

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Anonymalous
Valued Contributor

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


@SouthJamaica wrote:

@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.


That's an attempt to shift the blame, and it's coming from the same people who said inflation was transitory. There was nothing in 2022 that suddenly caused companies to become greedier, and while supply chain disruptions can cause temporary increases, those tend to sort themselves out. The reason prices have gone up and stay up is the massive increase in the money supply, as shown in this graph from the St. Louis Fed:

 

https://fred.stlouisfed.org/series/M2SL

Message 11 of 22
CreditCuriosity
Moderator Emeritus

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

This is going to get into politics quickly I can see..  Edge on side of caution please everyone.  

Message 12 of 22
SouthJamaica
Mega Contributor

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


@CreditCuriosity wrote:

This is going to get into politics quickly I can see..  Edge on side of caution please everyone.  


Just to refresh your recollection that it was you who started the conversation down that path:

 

"Hopefully gov't doesn't try to intervene with this like so many other things..."


Total revolving limits 657200 (536700 reporting) FICO 8: EQ 712 TU 710 EX 708

Message 13 of 22
CreditCuriosity
Moderator Emeritus

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


@SouthJamaica wrote:

@CreditCuriosity wrote:

This is going to get into politics quickly I can see..  Edge on side of caution please everyone.  


Just to refresh your recollection that it was you who started the conversation down that path:

 

"Hopefully gov't doesn't try to intervene with this like so many other things..."


Lets stop while we are all ahead.

Message 14 of 22
SouthJamaica
Mega Contributor

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


@CreditCuriosity wrote:

@SouthJamaica wrote:

@CreditCuriosity wrote:

This is going to get into politics quickly I can see..  Edge on side of caution please everyone.  


Just to refresh your recollection that it was you who started the conversation down that path:

 

"Hopefully gov't doesn't try to intervene with this like so many other things..."


Lets stop while we are all ahead.


You got it Smiley Happy


Total revolving limits 657200 (536700 reporting) FICO 8: EQ 712 TU 710 EX 708

Message 15 of 22
Zimmy71
Established Member

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

Junk debt buyers are rubbing their hands right about now. 

temp-Image-Vhh-Kp-DdCi0Grrsavorone-card-artbB54NYybankamericard-credit-card-224x141-14728574960-dba503bc28-mcard-disney-100-card
Message 16 of 22
babbles
Established Contributor

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

Yep! I sense that too!

Message 17 of 22
Beefy1212
Established Contributor

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


@PullingMeSoftly wrote:

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.

Interest isn't 20.63%, APR is that would make monthly interest about 1.72%

I am also curious how they came up with card holders carrying a balance, is that reported balance or an actual balance carried month to month? I am also curious how it treats consumers with 15 cards with balances you might be able to say 47% of credit card accounts are carrying a balance but I highly doubt anyone has the granular data to scrub out people with no balance vs people with 15 balances vs people with multiple balance being carried intentionally under zero apr deals all three of these numbers would paint a very different picture.

 These numbers sound dire and a trillion dollars is absurd for an individual, but this population level numbers not an individual, it is across 84% of all adults in the US and foreigners holding US credit, and business credit cards according to wallet hub there are about 1.25 billion credit cards and to reach this new 1.03 trillion milestone (45 billion increase) average balances increased a whole 36 dollars.
I highly doubt anyone would be concerned if instead of saying credit card debt has risen to 1.03 trillion they said average monthly balance has increased from 788 to 824 dollars. 
https://wallethub.com/edu/cc/number-of-credit-cards/25532#:~:text=There%20were%20about%20572%20milli....

We are still several hundred million fewer credit cards than the 1.5 billion in cirrculation in 2007
number of credit cards.png

I would also challenge the this debt isn't driven by frivolous purchasing, overpaying for new cars, 1000+ dollar phones and houses people can't afford and didn't particularlly need, drive deep into peoples budgets and that then can't afford to buy things like food and clothes they are putting on credit. I live in a lower income area and the number of people driving tesla's in borderline ghetto areas is laughable. If the general public spent money in a reasonable manner they likely won't be carrying debt at the level they are. Americans are addicted to overspending, no one needs a 6-7 dollar coffee at starbucks, if people were not buying these drinks there wouldn't be a starbucks in every shopping center and at nearly every freeway exit. If people were not overspending apple wouldn't sell 1000+ dollar iphones every year. 

Yes the economy is bad right now, yes inflation is on the rise, yes prices are bad, yes givernment printing of money/prime rate manipulation/stimulas&bailouts are contributing to all of this but lets not forget the prime rate was at one point 21.5% (1980) and today it is "just" 8.5% we have simply been spoiled by 2ish percent prime rates for a long time. 

Fed-Prime-Rate-United-States-Prime-Rate-Chart.jpg



Message 18 of 22
Anonymalous
Valued Contributor

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


@Beefy1212 wrote:I am also curious how they came up with card holders carrying a balance, is that reported balance or an actual balance carried month to month? I am also curious how it treats consumers with 15 cards with balances you might be able to say 47% of credit card accounts are carrying a balance but I highly doubt anyone has the granular data to scrub out people with no balance vs people with 15 balances vs people with multiple balance being carried intentionally under zero apr deals all three of these numbers would paint a very different picture.


They cite (link) this Bankrate article as a source for how many people are carrying a balance:

https://www.bankrate.com/finance/credit-cards/credit-card-debt-survey/#key-insights

It comes from a survey, where cardholders said whether they were carrying a balance from month. So it doesn't rely on the incomplete information from the credit bureaus, for instance.

Message 19 of 22
Beefy1212
Established Contributor

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


@Anonymalous wrote:

@Beefy1212 wrote:I am also curious how they came up with card holders carrying a balance, is that reported balance or an actual balance carried month to month? I am also curious how it treats consumers with 15 cards with balances you might be able to say 47% of credit card accounts are carrying a balance but I highly doubt anyone has the granular data to scrub out people with no balance vs people with 15 balances vs people with multiple balance being carried intentionally under zero apr deals all three of these numbers would paint a very different picture.


They cite (link) this Bankrate article as a source for how many people are carrying a balance:

https://www.bankrate.com/finance/credit-cards/credit-card-debt-survey/#key-insights

It comes from a survey, where cardholders said whether they were carrying a balance from month. So it doesn't rely on the incomplete information from the credit bureaus, for instance.


I missed the link when I was reading the article, thanks for pointing that out...


They asked just under 2,500 people less than 2,000 of which actually had a credit card... The error of margin of that before even factoring for lying/errors is through the roof.

 

"Total sample size was 2,486 adults, among whom 1,919 were cardholders" 

 

that is a ratio of roughly 1:651,400 people to credit card accounts

 

Surveys are one of the lowest quality sources of data on anything.



Message 20 of 22
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