Americans not paying off credit cards... we're defaulting

[Kurt_and_Hunter]

"Consumer debt has been steadily falling over the last couple of years. The Federal Reserve said last week that household liabilities — including mortgages, credit card accounts and non-revolving accounts like auto loans — totaled $13.9 trillion in the second quarter of 2010, down $200 billion from the same quarter a year earlier. Outstanding revolving accounts, mostly credit cards, declined to $832.2 billion from $915 billion in that same period, the Fed said in a separate report earlier in the month."

Americans are tightening their belts and leading more virtuous lives. The saving rate is way up! Credit card debt is way down!

What responsible people we are, with our flinty yankee virtues. If only that wicked government could be as virtuous as the people!

:patriot: :patriot: :patriot:

Needless to say, that is bullshit.

"But economists said they were trying to calculate how much of the drop in credit card debt was the result of banks writing it off — charging off, in bank parlance.

Mr. deRitis, of Moody’s, said he was examining the credit card accounts of individual borrowers. He said he expected to learn which borrowers were voluntarily paying down their debt, which were taking on new debt, and to what extent existing borrowers were curtailing balances by paying more than the minimum. While the study is not yet complete, Mr. deRitis said it appeared so far that most of the overall decline is in the form of charge-offs."

http://www.nytimes.com/2010/09/25/business/25credit.html?hpw

Ohhh... the huge drop in credit card debt is mostly due to credit card banks switching hopeless defaulted-on accounts from outstanding debt to written-off losses. (Mostly for tax purposes, I'd think.)

Now then... back to, "Why can't the government be more like the people?" The government really doesn't have the option of declaring 10% of the national debt noncollectable just to get it off the books.

[LibDemAlways]

1. As long as interest rates were reasonable, more people could pay

down their debts - thus fewer defaults. Do you suppose this could have something to do with credit card companies' greed - raising interest rates to 30% on existing debt - making it damn near impossible for people to meet their obligations? Meantime these same shitheads are paying less than 1% on savings.

Couple loanshark rates with high unemployment and the outcome is very predictable.

[Warpy]

2. It has more to do with credit limits being automatically extended

beyond anyone's ability to pay in good times and then having those times go bad. You can't get blood out of a stone and you can't get that $300 monthly minimum payment out of somebody who lost a good job and now has two busing tables and collecting money in a gas kiosk, no matter what you do with the interest rates.

They're not exactly writing them off, either. They're often selling the debt to a rabid collection agency.

[glinda]

3. I agree with you on the rates.

[RadiationTherapy]

4. The social contract has been breached. Not sure what will happen before we find balance.

They can make credit harder to get, but what about all the current outstanding debt? An american bastille perhaps?