Are Credit Cards The Next Collapse?

McClatchy:

First came trouble with mortgages, then home equity loans and commercial real estate. Now, banks are starting to worry about credit cards.

As the economy slows and unemployment rises, consumers are defaulting on credit-card payments more often. And though that trend is unlikely to create a crisis in line with the mortgage fallout, it's still a headache for banks that are already hurting.

Read the whole story: McClatchy

Comments

[AnthonyVolpe]

Guess what the most marketed and advertised commodity is in the U.S. DEBT!!! Credit card companies market their product to dead people and cats.

Frankly, I won't be the LEAST bit sorry to see them get hit next. They need to learn a lesson.

And so do we. We need to live based on what we have and not what we owe. If we can ;earn to do that, we won't need credit cards, FICO scores, or any of that crap.

[totaldisbelief]

Unemployment rising, Wages stagnant , Households stretched, Medical bills out of control, High fuel and food costs...yeah I guess credit card defaults will be next.

[drkazmd65]

Is kind of a no-brainer isn't it totaldisbelief? - That's exactly why I have been weaning myself off of the friggin' things for a couple of years now and actually attempting to live on what I earn.

And,... it ain't easy while paying off old Credit Card, Student Loan, and Auto Loan debt,... at least the car is paid for now,...

[DuganS1]

Wages are not stagnant. The tremendous drop in gasoline, heating oil, and natural gas prices in the last two months translates into a large increase in real wages for most people. Besides that, after tax wages had expanded significantly from 2000 to now; and even 2008 which includes the money from the rebate checks.

[Graywolf48]

Many people are struggling to make these payments so they can keep their cards. The banks do all they can to cause defaults. They delay posting payments, holding checks for several days so they can then charge the $40 late fee and jack up interest rates. They change and shorten payment due dates and grace periods. One card (JC Penney/GE Credit) recently decided to shorten its payment period AND compound their interest charges from monthly to DAILY! Once a payment is missed or just a few hours late, the games begin. Late fees, maximum interest, sometimes throwing the balance over the limit and resulting in "over the limit" fees, additional interest charges causing minimum payments to double or treble, just snowballing the balances beyond belief. I've seen some people (without making additional purchases) watch their balance climb several thousand dollars over the course of six months due to excessive fees and interest. These accounts with the grossly inflated balances are then "written off" for tax purposes and sold to collection agents for pennies on the dollar. Credit in America has become a criminal enterprise that would make the Mafia proud (an very rich)!

[vippy]

I have to agree but makes you wonder why congress/senate is not taking action unless they
are in with it somehow? Just like with the gas prices, which were caused due to their Commodities Modernization Futures Act and they were briefed on the fallout but decided NOT to
act on it. Seems like they are only interested in stuffing their own pockets no matter what.
People need to see who really represents them as their is no representation!

[Graywolf48]

Banks and credit card companies make BIG donations to Congressional leaders and provide lots of other "perks". Political campaigns are expensive and bankers know how to buy influence. Until the lobbyists are shut out and campaign finance reform levels the playing field, we'll be stuck with a distortion of the golden rule, in that "he who has the gold makes the rules." Regulation is the key. Usury laws should be revised and enforced. Banks, like any business should make a profit, but there needs to be limits set so the entire economic system is not brought to the brink of collapse. In addition to regulation, schools should be required to teach a basic course on money and banking. People should be taught the TRUE cost of credit, know the value of compound interest, how to balance a checkbook and how to make a budget before they graduate high school.

[DirkdenHartogForObama]

I know a guy that was really smart. About 6 months ago he maxed out all his cards, took big loans out at abanks and accumulated over 200k and left the country, sworing he would never com back. He has dual citizenship so there is nothing the USA or the banks can do except write it off.

Bravo for this guy!!

[cindyw]

That's not smart. That's dishonest.

[totaldisbelief]

Yeah dishonest...probably something like the Wall St. CEOs or politicians would do.

[AnthonyVolpe]

Yes, it is, but so is sending credit card offers to dead people, dogs, and newborn children.

Rather than run up $200K in debt and skip the country, if he really wanted to beat the industry, he'd pay for things with cash and live within his means. Credit cards are only around because people think they need them.

[DirkdenHartogForObama]

Hey, this guy knew who the real dishonest people are in the USA. He is smart. and now living in a modern country to boot. He also HATED the rape, and plunder of Iraq, being a Vietn am Vet.

[DirkdenHartogForObama]

If everyone had the balls to do what he did, perhaps your govt would straighten up.

[DirkdenHartogForObama]

Lots of your tax dollars are being used to kill innocent people 10,000 miles away. Lets hear what you have to say about that!!

[drkazmd65]

That asshat is exactly one of the root causes why the rest of us are having to foot the bill for higher interest rates.

Bravo my Liberal White ass,.. this guy should be tarred, feathered, and run out of the country on a rail.

He is one of the reasons the Credit Card companies get to justify shafting all the rest of us.

[TXfemmom]

That is not smart. That guy was a weasel. I know of many foreign doctors who come here, their practices are not quite up to par, they commit billing fraud and soak in payments they do not deserve, harm patients, and then skip back to their own countries with their ill-gotten money. Most of them leave behind investments mortgaged to the hilt, maxed credit cards, unpaid taxes, taxes which have not been paid on their employees, and their malpractice does not have to pay becaus they will not come back to defend their cases.

Theyharm everyone and everything and your friend sounds like such a dick.

[DirkdenHartogForObama]

Americans are suckers with no self discipline.

[sherrzinpa]

Definitely not a smart guy. More an idiot than anything else.

[LeonBNJ]

I do agree that this is the next possible collaspe, but it may take longer to kick in and will lead to long term changes. I already see a lot fewer credit card offers in the mail. One credit card I rarely use and never ran a balance over $ 500 on (and paid off in less than 2 months) just cut my credit line from a stupid $12,000 to $6,000.
I am very fortunate to have several credit cards and able to pay them off at the end of every month. I carefully use my cards to my advantage, convenience and security. The reality for millions is that they use their credit cards to survive emergencies, such as car repairs they just don't have the cash for right then or for major needs. Millions more misuse credit cards for living will beyond their means, to keep face even with decling incomes or becoming unemployed, then getting trapped paying too much in interest and fees.
The issuers need on their own and the Feds need to put in regulations to limit credit lines, to limit marketing, cap the top interest rates at 18%, fixed caps on types and amount of fees and in general making the credit card issuers to be more responsible in their issuence of such cards.

[drkazmd65]

I think I have gotten 1 Credit card offer this month - down from many, many offers this time last year.

The only one I keep getting anymore is one through one of my frequent flier mile memberships,... with a base interest rate (current) of about 18% APR. These guys attempt the same lame offer pretty much every month - even though I haven't flown on that particular airline for over 2 years.

[NTO08]

FAR WORSE: The environmental crunch as the Earth cannot sustain the use of resources at the current rate...dwarfs the credit crunch by BILLIONS...:


http://news.bbc.co.uk/2/hi/science/nature/7696197.stm

[rkimball]

pelosi is introducing a bill to bail out credit card debt holders. if taxpayers bail out debtors they will spend again & get the economy going or so that's the theory.

[MilwaukeeDan]

rk, this is a government theory and it is insane! We have to get away from consumer/debt driven economics or we are dead as a country. Where will these people, that get bailed out, get their fresh spending money? MORE DEBT! Most "leaders" in Washington can't think outside the box, that's why we're in the situation we're in.

[rkimball]

i agree with you,this is madness. the only thing driving the economy right now is consumer spending. consumers can't spend because they are maxed out on credit. economic growth will hit a brick wall. bail out people that are trying to help themeslves through tax breaks or by allowing them to write of credit card interests like it used to be years ago.

[Egalitare]

Live by the fee, die by default.

[Earl]

Credit is America's product. Goods and services are merely vehicles for the creation of new debt.

[DirkdenHartogForObama]

Exactly,. A friend of mine worked overseas with me and went back to the States to buy a new car. He had ALL cash in a briefcase and negotiated the best deal on car of his choice. The saleman then asked him which bank he was using to finance it. My friend took out the briefcase and said, CASH, BABY. The salesman was LIVID. they don't sell cars they sell loans.

[MilwaukeeDan]

"They don't sell cars, they sell loans", exactly! Wonder why GMAC Financing is the only part of GM that makes money?

[vippy]

Only because the USA is the only country I know that has horrible wages. Compare the wages with Europe and you will be amazed. I guess the US made the credit available so you would not
notice the huge disparity in income. Not only the hourly wage but the benefits that should go along with it. And yet people are so brainwashed that they think socialism is a bad word. We all have
seen that capitalism is not working, it does not trickle down, yet the dumb people believe we want
to spread their wealth - what wealth?

[Earl]

The bad news is, the government will bail out the credit card companies. The good news is, we'll get enough miles to pay for the mission to Mars.

[Oldbuck]

I have said for the last two year that the credit cards would be the next shoe to drop they have no regulation just as the mortgage loans. They change interest rates in the middle of the game , charge late fee, which are usury rates. They roll their due dates around till your don't know when then if you are ever late they jump you rates double digit. I would bet there is more out standing balances on credit cards than mortgage loans.

[tedeger]

Sent this to B of A

Your recent letter ‘offering’ us an easy route to insolvency was not welcome, for the following reasons;
1. Only an idiot, or a gullible patsy, will EVER accept a ‘Variable Rate’ loan, no matter how attractive the initial terms. “Variable” means only “Increasing at the whim of the lender.” It requires an incomprehensible degree of stupidity or naiveté even to consider accepting such disadvantageous terms.
2. 12.74 per cent. Is NOT “Low!” Low interest, at which the lender can still make a profit, is 2 per cent.! “Reasonable,” or “Moderate” interest is on the order of 5 to 6 per cent. Anything above ten per cent is USURY! The current practice, of cranking loans to above twenty per cent as soon as feasible, or for any excuse, reasonable or not, is simply “Loan-Sharking,” and is morally CRIMINAL, ‘legal’ or not.
3. We consider the attached letter to be a gratuitous insult, and resent the implication that we could possibly be stupid enough to accept one thin dime under the conditions outlined therein.
4. To relieve our feelings, and to save yourselves postage and possibly another lecture about fiscally moral behavior, please CLOSE the subject account. We have no intention of EVER doing further business with an organization that has such a low opinion of the intelligence of its customers, and/or such a vanishingly small sense of fiduciary morality.

[francoise]

tedeger,

I allowed myself to copy your letter because I just got a "juicy" offer from American Express.

;-)

[DirkdenHartogForObama]

Easy credit was the way to fleece the american people into the illegal invasion of Iraq. most people couild care less about the world as long as they can shop. Most selfish people on earth, Americans.

But now they are paying for their lack of morals. No sympathy.

[KOisGod]

Fortunately, we pay off our CC every month. My wife and I have one card, in each of our names. Its issued by a brick and mortar bank where we go pay our bill on the last day its due. So we essentially borrow their money for a month, without any fees, plus earn air miles for every dollar spent. But that takes discipline to not go overboard and we make sure to have the money to cover the bill by the middle of each month.

[DirkdenHartogForObama]

keyword in your post ''discipline'

Sorely lacking in America and especially their military .

[chendri887]

Ah, yes, the fruits of rank laissez faire capitalism at their finest. Unregulated corporatism running everything. The majority of the world's peoples as its slaves. The country's ruling elite so far gone on right-wing Kool-Aide that they either have no empathy for we the people and no clue how to stop this deranged freight train if they do. What a mess. We've got some serious work to do if we are going to make this country, and this world, a more equitable place. Let's all agree not to resort to violence, name-calling, and lack of empathy for those different from us in the process. Too much to ask for? Yeah, I thought so.