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Write-offs are driving decline in credit-card debt - MarketWatch
Think of what that means in regards to the overall economy, government stimulus, unemployment benifits and jobs related to consumer spending
Credit-card debt has been falling for 16 straight months but consumers aren't paying off their financial obligations as much you might think. Instead, they're walking away from the debt, forcing credit-card issuers to write off as much as 90% of that reported drop, according to a new report by CardHub.com.
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What Papadimitriou found was this: Last year, outstanding credit-card debt dropped an eye-popping $93.2 billion to about $876 billion, according to Federal Reserve data, which are not seasonally adjusted. During the same period, charge-offs -- the unsecured debt the banks determine they won't get back and charge off to loss reserves -- added up to $83.3 billion.
In other words, only about $10 billion of the drop is attributable to consumers paying off their debt.
Robert Hammer, chief executive of investment bank R.K. Hammer, said when credit charge-offs are exceeding receivables, the impact is clear.
"For the first time in my 30 years in this business, the dollar amount of card loans finished the year lower than they started," he said. "That would mean that consumers have either put their credit cards in a safe-deposit box and only get them out for special occasions or that some are cutting them up and not using them at all. And we don't think any of that is going on."
Think of what that means in regards to the overall economy, government stimulus, unemployment benifits and jobs related to consumer spending