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Thread: What credit-card payoff? Consumers are dumping debt

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    What credit-card payoff? Consumers are dumping debt

    Write-offs are driving decline in credit-card debt - MarketWatch

    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.

    snip

    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
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    Re: What credit-card payoff? Consumers are dumping debt

    I guess I'm one of the people contributing to the $10 billion drop as I've cut my debt by $4k this year. My goal is to be completely out of debt (except for my mortgage) by 2011.

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    Re: What credit-card payoff? Consumers are dumping debt

    I have been debt free for 20 years. House is paid for, car is paid for and zero balance on the credit cards. We lived within our means and planned for our retirement. Despite the economy, we do pretty much what we want in retirement. We are not rich, we just live within our means.
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    Re: What credit-card payoff? Consumers are dumping debt

    Quote Originally Posted by Catz Part Deux View Post
    I guess I'm one of the people contributing to the $10 billion drop as I've cut my debt by $4k this year. My goal is to be completely out of debt (except for my mortgage) by 2011.
    good for you. i have no debt so to speak.......and own a boat but not a house.

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    Re: What credit-card payoff? Consumers are dumping debt

    Quote Originally Posted by liblady View Post
    good for you. i have no debt so to speak.......and own a boat but not a house.
    7000 and rising.

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    Re: What credit-card payoff? Consumers are dumping debt

    Quote Originally Posted by Lord Tammerlain View Post
    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
    One must wonder what their reserves set aside specifically for credit card charge offs look like. Especially since the reserves for other bad debt are pretty
    much destroyed due to the past two years of economic disaster.

    As for your question, the decline in use of credit is going to slow the economy, particularly since credit feeds consumption. With 70% of the economy related to consumers, that can't be good.
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    Re: What credit-card payoff? Consumers are dumping debt

    Quote Originally Posted by liblady View Post
    good for you. i have no debt so to speak.......and own a boat but not a house.
    My house will be paid off in five years. So, I'm almost done. Even now, I'm in a good situation because I could easily sell it for considerably more than I owe, in spite of the drop in housing costs. 15 year mortgage, ftw. Car is paid for. One more credit card to go.

    It is a good thing to not be owned by creditors.

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    Re: What credit-card payoff? Consumers are dumping debt

    Quote Originally Posted by Catz Part Deux View Post
    My house will be paid off in five years. So, I'm almost done. Even now, I'm in a good situation because I could easily sell it for considerably more than I owe, in spite of the drop in housing costs. 15 year mortgage, ftw. Car is paid for. One more credit card to go.

    It is a good thing to not be owned by creditors.
    I agree with you. Once you are in debt to them, they become your masters, jacking up your interest rate at their whim, and squeezing as much money out of you as they possibly can. Getting into debt on a credit card is, IMHO, a form of voluntary slavery.
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    Re: What credit-card payoff? Consumers are dumping debt

    You mean credit card companies that that have been draining American wealth over the last 15 years by ****ing their customers are getting ****ed by their customers?

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    Re: What credit-card payoff? Consumers are dumping debt

    Quote Originally Posted by NoJingoLingo View Post
    You mean credit card companies that that have been draining American wealth over the last 15 years by ****ing their customers are getting ****ed by their customers?
    I won't defend banks/credit card companies, because they have charged outrages rates and fees. However, someone who uses the card irresponsibly is also accountable. The CC company did not hold a gun to their head when they ran up huge debts or signed up for the card. Some people get what they deserve.
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