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What credit-card payoff? Consumers are dumping debt

Lord Tammerlain

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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.

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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
 
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.
 
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.
 
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.
 
good for you. i have no debt so to speak.......and own a boat but not a house.

7000 and rising.

Turns out the thing I love to do does not pay very well.
 
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.
 
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.
 
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.
 
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? :lol:
 
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? :lol:

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.:mrgreen:
 
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.:mrgreen:

Seems some people are interpreting it as "money for nothing". LOL.
 
Seems some people are interpreting it as "money for nothing". LOL.

Dire straits you say,

"We gotta install microwave ovens Custom kitchen deliveries We gotta move these refrigerators We gotta move these color TV's"

Yep to many people lived well beyond their means. Heck just charge it. Wait I can a second card to pay of the first.

Credit should be used wisely. I have taken loans out, but paid them off early. Have been debt free for years.
 
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.:mrgreen:
I would say the CC companies are indeed getting what they deserve. :rofl
 
Yep to many people lived well beyond their means. Heck just charge it. Wait I can a second card to pay of the first.
And you don't place any blame on a shift in societal morals regarding credit?

Credit should be used wisely. I have taken loans out, but paid them off early. Have been debt free for years.
Good for you. Do we, as a society, teach our children to act responsibly with credit or do we teach them to get whatever they can when they can and worry about paying for it later? Do we promote wanton consumerism and greed?
 
And you don't place any blame on a shift in societal morals regarding credit?

- An indivial is responsible for their own actions. Rather that be the buyer, the employee, the business owner, etc.

Good for you. Do we, as a society, teach our children to act responsibly with credit or do we teach them to get whatever they can when they can and worry about paying for it later? Do we promote wanton consumerism and greed?

- I can't speak for society. I raised my daughter to be a good person and the difference between "want" and "need". I also taught her the value of credit and how to use it wisely. She earned an allowance rather than given an allowance. She and her husband are keeping their head above water despite her being laid off from her job in December.

- Not sure who "we" is. Since I am an American I can say that my wife and I don't just go out and buy the lastest electronics or other items just because. We never believed in "keeping up with the Jones" way of life. While some of our friends upgraded their houses and cars over the years by taking out large loans. We stayed in our older nice house and tend to keep vehicles at least 10 years. Now we are retired and can do pretty much what we want, because we planned for it. Have a house in the mountains, house in the desert, cars paid for, debt free with still a nice nest egg.

- Just because someone says you can afford it, doesn't mean go out and buy it. Many did not and they are paying the price. Should banks riip them off. Of course not, but banks should not pay the price for an individual stupidity. Read the contract before you sign. If you don't understand, don't sign till you are sure you do. Pretty simple.
 
- An indivial is responsible for their own actions. Rather that be the buyer, the employee, the business owner, etc.
Ah, so you believe in individualism? Not into philosophy much eh? Are you Christian as well?

I can't speak for society.
I stopped reading after that sentence because it looked like you were going to ramble on about an unrelated topic.
 
Ah, so you believe in individualism? Not into philosophy much eh? Are you Christian as well?


I stopped reading after that sentence because it looked like you were going to ramble on about an unrelated topic.

I’ll be more direct in answering your question. IMO, many parents have not done a good job in teaching their children to “act responsibly with credit”. There are some that do. Who do think is responsible when someone lives beyond their means?

Your sly remarks tell a lot about you. One way to not debate.

My religious belief is important to the discussion. Einstein when asked about his religion once stated it was mosaic. I’ll go with that.
 
I’ll be more direct in answering your question. IMO, many parents have not done a good job in teaching their children to “act responsibly with credit”. There are some that do. Who do think is responsible when someone lives beyond their means?
So then you do understand that society plays an important role in behavior. You're moving in the right direction. ;)
Who is responsible when someone lives beyond their means? Well, everyone. Society sets the table for failure and unless the individual can overcome those patterns that are taught and social pressures to succeed/have more, then they will fall prey to the trap. Society needs to look down on greed, teach responsible living and handling of money and the media needs to stop glorifying excess.

Your sly remarks tell a lot about you. One way to not debate.
There was nothing to debate. I asked a specific question about society and you wanted to give me personal anecdotes about how YOU live and raise kids. Meaningless to the discussion. It did however prompt you to answer the question which THEN continued the debate. Making your attack on me, empty. ;)

My religious belief is important to the discussion. Einstein when asked about his religion once stated it was mosaic. I’ll go with that.
So whatever excuses your behavior, got it.
 
I've spent this month weaning myself off of credit card use, as a part of my overall stategy to accomplish my goal of paying of my house in 1.5-2 years time. I'm finding that using only cash really restraints my impulse spending and makes me look before I leap. I still was able to send in an extra $1200 on my mortgage.

Even if you pay off your card each month, you are still one month behind by using a credit card, and you spend more.
 
Who is responsible when someone lives beyond their means? Well, everyone. Society sets the table for failure and unless the individual can overcome those patterns that are taught and social pressures to succeed/have more, then they will fall prey to the trap. Society needs to look down on greed, teach responsible living and handling of money and the media needs to stop glorifying excess..

How do you see society doing this? Does it not have to start with a individual or the parents to make the change?

I understand what you are saying. IMO, It still boils down to individual choice. Even though that choice may be guided by society or the people the individual associates with.
 
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.


So, not only are people not using credit cards as much as they used to do, a lot of people are walking away from their debt, probably via the bankruptcy laws, leaving the credit card companies holding the bag.

Still, that 93 billion is peanuts. Just wait until the federal government goes bankrupt to the tune of 20 trillion or so, then we'll really have a financial crisis.
 
Credit cards have become so totally ubiquitous in our society. Even just 20 years ago they weren't accepted in supermarkets. Now, people like me use them for any and all daily purchases, except that I've given all that up now.

The credit cards make a percentage off of every purchase and retailers are beholden to them, because no one wants to carry cash anymore.

I think they are, in general, a negative force in our society. We would be better off without them, in my estimation.
 
Credit cards have become so totally ubiquitous in our society. Even just 20 years ago they weren't accepted in supermarkets. Now, people like me use them for any and all daily purchases, except that I've given all that up now.

The credit cards make a percentage off of every purchase and retailers are beholden to them, because no one wants to carry cash anymore.

I think they are, in general, a negative force in our society. We would be better off without them, in my estimation.

Overall, I think you're right. People buy things that they don't need and can't afford, then get trapped on the interest and penalties treadmill.

Guys like me make out quite well with credit cards. I charge virtually everything, but pay the bill in full at the end of the month. That way, I pay no interest, yet get the goodies, sometimes as much as 5% back on purchases. Over time, that adds up.

Of course, the credit card companies refer to us as "freeloaders", since we don't pay their outrageous interest rates.

I'm proud to be a freeloader.
 
Overall, I think you're right. People buy things that they don't need and can't afford, then get trapped on the interest and penalties treadmill.

Guys like me make out quite well with credit cards. I charge virtually everything, but pay the bill in full at the end of the month. That way, I pay no interest, yet get the goodies, sometimes as much as 5% back on purchases. Over time, that adds up.

Of course, the credit card companies refer to us as "freeloaders", since we don't pay their outrageous interest rates.

I'm proud to be a freeloader.

However, stores must still pay a transaction fee, charged by their merchant services account, for each CC transaction. Where do you think the money for those fees comes from? Not a decrease in the CEO's pay, I can assure you.
 
How do you see society doing this? Does it not have to start with a individual or the parents to make the change?

I understand what you are saying. IMO, It still boils down to individual choice. Even though that choice may be guided by society or the people the individual associates with.
Its kind of like saying - my libido doesn't effect how often I want to have sex. You may not understand how or why (or that it exists at all) the libido effects your desire but it effects you none the less.
 
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