U.S. Credit Card Debt Soars To Un precedented Hights

U.S. Credit Card Debt Soars To Un precedented Hights

en.epochtimes.com

In the aftermath of the U.S. mortgage crisis, the credit card bubble may be next to burst. In the past few years, banks have aggressively marketed credit card ownership and usage to consumers with limited income and low credit scores. Credit card standards remain lax, while loan standards have tightened to a degree.

More than 50 percent of senior loan officers said in a January 2008 Federal Reserve survey that they performed a more rigorous analysis before approving a mortgage or car loan over the prior three months. Only 14 percent said so in a mid-2007 survey of the same nature. Banks and lenders have tightened their lending standards following the collapse of the subprime market.

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The next wave of financial catastrophes following the housing debacle will be via the way of Credit Card debt...Millions of americans have been forced to use credit cards to survive due to layoff and the ever-skyrocketing price of food and fuel...More predatory lending practices will have hooked those desperate, into this system, and will burry them just like the Housing mess...

If at all possible, avoid taking up any CC deals at this time, and keep your usage to a minimum...

Credit card debt accelerated to unprecedented heights since bank loans began to dry up due to mortgage defaults. Total U.S. credit card debt reached almost $800 billion in November 2007, up from around $680 billion in March of last year, according to the latest available government statistics.

en.epochtimes.com
(visit the link for the full news article)

It is only probable that the cc crisis will be the next to hit rock bottom. Of course the banks saw this some time ago and pushed to have cc debt removed from bankruptcy. Now you cannot default on cc debt. I truly feel sorry for all those that have been aggressively marketed to. Some here will say it is the fault of the consumer and to a point it is. However when all you are doing is trying to put food on the table you do what you must. This is just another attempt to eliminate the middle class. When everyone is broke, homeless and starving then the powers that be can do as they wish. The people will not be able to rise up. Bad times are coming and I feel that our country will never be the same.

respectfully

reluctantpawn

reply to post by DimensionalDetective


Here is a general question related to credit card debt: what do you think the likelihood of a credit card holder bailout is?

The reason I ask is, while my wife and I are not as badly of as many others with the whole credit card thing (we have about $8k in CC debt), if the whole thing is going to crumble, should we bother paying them off or just say screw it? We already own a home and cars, so what else do we need good credit for?

While we could take our tax rebate and pay off our highest interest card completely, would we be better off buying food and gas? Or investing it in gold and silver instead?

What do other people think about the whole credit card thing? Those thieving b@astrds steal a major portion of our monthly income because we are only able to make minimum payments. The fees keep increasing and the balances never go down. I am getting increasingly frustrated with the whole system, because we were basically forced to get the damn things in the first place because we never have enough cash to pay all our bills and buy clothes and stuff for the kids. Every time we get near to paying one off, we have to use it again! Arrrgh!

I know we are not the only ones in this predicament...any suggestions?

reply to post by keeb333


Credit card companies have a few options to get their money from you dependant on state laws.

1. Wage Garnishment
2. Judgement
3. Lein

You may own a home and your vehicles but remember, your vehicles wont last forever they will need to be replaced. If your just scraping by now it would be safe to assume you'd need to finance a new vehicle when the time comes. In regards to your home. Do you plan to stay in this home for the rest of your life? What if interest rates take a huge drop, wouldnt you want to refinance and take advantage of the interest savings? Again I am assuming you have a mortgage, if I am wrong then you need to protect a paid off home.

You could stop paying all of your debt and settle it out in about 6-8 months. You can typically settle a past due credit card bill for 50% of the balance outstanding, sometime as low as 15-20% but that is not the industry norm.

[EDIT]
Some suggestions to try and get out of the hole. Defer car and mortgage payments and pay off a bill or two. You can defer a car or mortgage payment once every 12 months so long as you dont have any lates in that 12 month period. A deferral is basically skipping a months payment and adding another month to the term of your loan.

Transfer all of the balances you can to a credit card with no fees and 0% interest. Once the interest free period runs out transfer that balance to another new credit card with 0% interest. Continue to do this and borrow that $ interest free.

Dont only look at your cards interest rates when deciding who to pay off. Sometimes finance charges and other fees on some cards far outweigh the interest being charged. Dont focus just on that number, look at all of the charges your incurring and decide which cards are really costing you the most/least.

What if the whole thing doesnt crumble? I wouldnt risk my credit rating on a best guess. Your credit rating has a huge impact on your cost of living, especially over a typical 30 year fixed rate mortgage.

FWIW I am a Bill collector.



[edit on 28-4-2008 by BluByWho]

reply to post by BluByWho


Thanks for the info...no we don't plan on living where we are at forever, unless the economy completely crashes.

So you think we should take the rebate and pay off the one card?

How do you get CC companies to settle for less than the full amount?


Edited to add: We have 3 kids, and have never had trouble providing and paying the bills until recently. Food and gas are through the roof!!! We spent over $700 on groceries and baby supplies last month (using coupons, generics, and going to multiple stores to find the best deals). It's insane, and we are spending several hundred bucks a month just to make the minimum payments. Our house is already on a fairly good (about 6%) fixed rate, but but student loans (which are currently in deferment) are going to want another 400 bucks a month from me starting this summer.

[edit on 28-4-2008 by keeb333]

reply to post by keeb333



To get a company to settle you have to not pay the bill, then it will get sent to the companies internal collections, you may be able to settle the debt with internal collections but they typically dont settle for much of a discount.

You'll have to wait until the account is placed with a collection agency. All you do is call the collection agency and offer 50%, they will tell you they can't do it, they may play good cop/bad cop with you, but in the end if you stick to your guns they will settle, it may take some work and patience on your part. Some bill collectors can be a handful to deal with.

I DO NOT recommend this route if you have good credit, as settling debt will bring down your credit rating, if you have poor or very poor credit you will not be as impacted by doing this, more than likely your credit rating will improve. If your score is above a 600 I would not recommend this route.

I offered some other advice in my previous post I edited, take a look there, may be a better option for you, I get the impression you have a good credit rating and just dont like the banks and their fee's (who does?!).

[EDIT]
In terms of groceries I suggest buying in bulk if you don't already, something like sam's club or costco. That could bring down your grocery cost 10-20% right there. Maybe not a huge savings but every penny counts. A penny is a days interest on a dollar. It sounds like your a smart shopper, but remember, gas prices are up to, driving store to store to save $.10 here and $.50 there might be outweighed by costs in fuel. Can you carpool to work? I have 2 coworkers I can carpool with, instead of filling up my car every 4 days to the tune of $50, I can fill up every 10-12.

You could also refinance your home now to consolidate all of those student loans and credit card debt into your mortgage, assuming you have some equity, it may save you a lot of money. Your mortgage will cost you roughly $6/mo for every $1000 borrowed. Figure out how much debt you have lets say that $8k credit card debt is added to your loan, that would increase your mortgage by $50/mo, far less than your paying monthly on that card currently.

[edit on 28-4-2008 by BluByWho]

One of the problems also with he credit card debt right now is not only linked to the market crash and people having to supplement income with credit card, but also many people are spending their credit card money waiting for the stimulus checks to come in.

Many think that this stimulus check will be a lifesaver but they are far from the truth.

When the checks comes out, many will not used them for their bills but they will spend them on other needs.

Still the credit cards will be unpaid, within 30 days of receiving their stimulus check they will have spend it, and guess what the financial situation will still be the same or either worst.

[edit on 28-4-2008 by marg6043]

reply to post by BluByWho


Hey thanks, I did not know that you could refinance your home and student loans together...We have some equity, but we are trying not to refinance right now because we want to move in a year or two (circumstances permitting)....I am just frustrated with the bill situation right now, as it seems that the credit cards are the most costly and useless expense we have. I know it's our own fault for ever getting them, but it's still frustrating.

We both have good jobs, yet we still struggle from month to month and are unable to save anything. Our credit is pretty good, and it would be a shame for our scores to drop because we have worked very hard over the last 10 years to reestablish good credit (mistakes were made early on).

Maybe the Fed can just print some more money and send it over this way?

Edited to add:

While I understand math quite well, and have a science degree, economics is a baffling subject for me. I don't understand interest; it is essentially creating something from nothing. I don't like violations of conservation!

[edit on 28-4-2008 by keeb333]

Keeb I don't really have any advice to give you, but will, against better judgment, share some thoughts I have on this topic.

First some preliminary info: I have ~$15k in CC debt (accrued mostly during college and right after,) and ~$45k in college loan debt. I work a low paying job (though I happen to make more than most of the other workers because of my skill set,) and live far below my means just to make payments to debtors. My student loans have been in economic hardship deferment for 3 years now, but that ends in 6 months, at which time I will be entirely wiped clean of all income each month. I had made progress a few months ago on the CC debt through consolidation of cards and large payments when possible, but emergencies coupled with raising costs necessitate their continued use.

Thoughts: I am 30 years old, and feel like I will DIE before being able to fully pay back this debt. So what is the point? Why continue struggling only to see all the income go to debt that was accrued 9 years ago based on false promises of a high paying job after college? Why put up with the extortionist practices and interest rates? Why pay for past mistakes when they were made due to misinformation given by predatory liars who purposefully entrap?

This is how I now view the debt: I will never be able to pay it off. Hence, I will always be paying out monthly. Hence there is no point in paying as much as I can to reduce balances, it would be years of double payments just to budge them. Hence I might as well go on and pay what I can to keep them current (which they are and always have been,) while continuing to use credit when it is necessary, since it is never going away before I die anyhow.

I sometimes imagine life without the debt. I would continue to live below my means, and I would be able to keep nearly all of my income for use where it is needed in life. It nearly brings a tear of joy to my eye! I would be able to finally help my struggling girlfriend and her two children (not mine) make ends meet. The thought is nothing more than a pipe dream of course. The reality is that I will continue to make barely enough to survive (if this factory doesn’t close, which it is close to doing due to overseas competition,) costs will go up, and payout will increase far beyond my means when student loans come out of deferment (how dare I have studied physics with the initial hope to help bring cheap energy abundance to the world; in hindsight I can’t believe I was so foolish to think society would pay me back in kind.) The remainder of my life will never be more than going to work each day as a slave to the system of debt, unless some benefactor chooses to take me on, which is not something I expect to happen, though my gratitude would be eternal if it did.

So what can people like us do? On these boards I hear a lot of talk about the economy and different takes on how it is affecting people. I have not heard many of the people in debt speak up though, I think perhaps because we are secretly hoping it all comes crashing down and our debt gets erased somehow. Others hope there will be a government bailout, you know, like they did for the homeowners and the banks.

I won’t keep my hopes up.

My advice and you can take it for what it is worth. First learn to live on less than yo make. Second get 1000$ in an emergency fund. Start paying off cc debt with the smallest to largest no matter the interest rate. When the first is paid roll everything into the next debt. Pay your mortgage first. Sell your car and pay cash for something that runs. Use extra money from car payment to pay off debt. GET A WRITTEN BUDGET! It is imperative that you spend all your money on paper before you actually spend it. Bye the way these are not my ideas, the belong to Dave Ramsey, google him and learn. I have no cc debt no car payment and only have 15 years on my mortgage. We drive late model vehicles and live in a home that is the envy of our friends. We have three children at home, and make less than 75k ayear combined.

respectfully

reluctantpawn

keeb333

Start negotiating the interest rates with you banks/creditors and then follow what reluctantpawn is telling you.

Most banks will work with you on the interest rates.

reply to post by Ionized


I feel the same way a lot of the time, Ionized! I'm 31 and have woken up to the reality that the system is B_ U_ L_ L_ S_ H_ I_ T_!!!!!! (mods, those are individual letters, not a forbidden word!)

What is the point of slaving away when it will NEVER be paid off? Why not provide for your own with what you have now, and tell the corporate masters to piss off?

Sometimes I wish I could just take my family and go find somewhere unowned and livable, to farm and hunt and live in peace. Really, that's all I want, is just to be left the F alone!

reply to post by reluctantpawn


Hey thanks for the input. You are not the 1st person to mention Dave Ramsey to me....I suppose should check out what he has to say.

Our tax rebate is def. going to pay of credit cards. But instead of the biggest, maybe we'll pay a few of the smaller ones.

reply to post by keeb333


A canny ATS member posted an idea a while ago of how you could possibly get a credit-card debt 'legally' (i use the term loosely) written off. According to their idea, you include a signed letter along with your minimum card payment stating something to the effect of: "Please accept this payment as final instalment, and close my account" and if the payment is accepted, then it could be argued that they also accepted the terms of your letter

I'm so happy I didn't fall too deep into the Credit Card debt. I had a rough start of it when I was a youngster fresh out of college, but then realized that having debt only meant you weren't really "Free" as people had hoped they are. So I decided to walk down the path of NOT having any credit cards... then I finally got me a secure version and I hardly ever use it, balance has been zero for several months now... it's a wonderful feeling... Now if I can just figure out how to pay off my car and mortgage asap

Don't get caught up in the paying the "minimum payments" sceam.

reply to post by citizen smith


I have heard mention of this in the past...Does it work and has it held up in court? Do you know anyone that has successfully done this?

Originally posted by DimensionalDetective

If at all possible, avoid taking up any CC deals at this time, and keep your usage to a minimum...

Explain me something, don't we need a CC to get a credit history?
How can we apply for mortgages if we've never had a CC?

Paying ur utility bills on time only goes so far.....right?

school me, plz!

Bottom-line: There is no such thing as a free ride. No matter what avenue the credit card holder takes – it is money that was not earned, hence CREDIT (and not CASH). And therefore should be paid back, especially by those with wild spending habits that go beyond basic necessities, such as food, clothing and shelter.

Scenario: What’s that you say? There’s a sale on something bigger, faster, lighter and cooler? I’m in! How much? And the cycle continues. Y’all get the idea.

[edit on 2008-4-28 by pikypiky]

reply to post by ModernAcademia


Nope---Got a car? A house?

I have NEVER owned a CC, and my rating is perfect based on car and mortage payments...I get card offers all the time based on these things, but I just toss them into the trash. I refuse to be in debt to these particular scam artists and extortionists-EVER.