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Credit Card Defaults Are Soaring
By JLP | December 24, 2007
Here’s some “lovely” news on the credit card front:
According to Money, credit card defaults are alarmingly high. According to the article credit card delinquencies are part of the fallout from the subprime mess. So, this really shouldn’t be a surprise to any of us.
All of this bad news has hit the financial sectors pretty hard this year:
I wonder what this chart will look like at this time next year…
Topics: Investing, Miscellaneous | 8 Comments »
December 24th, 2007 at 9:50 am
Scary, isn’t it? Great news just in time for Christmas debt…
December 24th, 2007 at 11:59 am
::sigh:: That’s not the kind of merry Christmas I think we’re all hoping for.
Unfortunately, like usual, it comes down to fundamentals: spend less than you earn and avoid the mess.
Happy holidays one and all!
-
Ryan
http://uncommon-cents.net/
December 24th, 2007 at 1:50 pm
This makes me pretty sad. I’m all for using credit cards to build credit, earn rewards, delay payment for time value of money … but only if everything gets paid off when the statements are posted. I get that sometimes extraordinary circumstances force people into debt, but so many people are in debt just from everyday overspending. I wish for better personal finance education in schools, but that’s probably not going to happen. I guess I feel bad for the people who have defaulted or will default, but I can’t say I sympathize too much. They got themselves there.
December 24th, 2007 at 3:18 pm
An update on an old saying: a fool and his credit will soon party!
December 24th, 2007 at 5:58 pm
Shall I sell my AXP or is the news already in the market?
I also have very little sympathy. I understand when someone gets in debt because of a true emergency like life-saving medical treatment – most of us would rather be alive and in debt than dead but with money. Sometimes insurance refuses to pay, sometimes the bills are so huge that even out-of-pocket costs add up. But I have very little sympathy for those who spend more than they earn.
I also don’t believe that it is “lack of financial education”. I grew up in Soviet Union, hardly a place for “financial education”, yet it always seemed obvious to me (and my parents who could barely speak English) that credit card bills must be paid in full before the interest starts to occur. It was also obvious to most immigrants I know. It’s really quite simple: 1) if you borrow money you have to pay it back – this is moral, not financial education 2) with credit cards if you don’t pay on time you have to pay big interest. Interest adds up. Hardly rocket science.
December 24th, 2007 at 9:10 pm
So, now we have high default rates on mortgages, car loans, and credit cards. What’s next?
I do have some sympathy, or at least some understanding. Like Ben Stein says, one of the biggest problems is inequality. How do you make up for that? Overspend to make up the gap. Dumb. But human nature.
December 25th, 2007 at 12:48 am
Inequality is high in many countries, but they don’t have huge CC debt issues. The world’s highest “Gini coefficient” (the standard inequality metric) is in China, which is also the biggest saver.
December 27th, 2007 at 9:02 pm
I believe the biggest problem some of the small business owners and entrepreneurs face due is to use personal credit to invest in their ventures. I am about to post my business plan for review by potential angel investors at http://www.go4funding.com. I hear from a few of my friends they seem to have amassed a large amount of investors in such a short term. Wish me luck and happy holidays.