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The Other Debt Crisis: Surging Credit Card Usage
| June 13, 2008 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
Many Americans’ disposable incomes continue to decline, due to the rising costs of necessities. Consequently, many cash-strapped individuals are turning to credit cards to extend their budgets. While this may be a boon for credit card companies, such as Visa and MasterCard, it may also spell trouble to the already “struggling” banks that underwrite these cards and to the individuals borrowing. Note, credit card companies are assuming little risks by continuing to extend credit cards because they make a good percentage of their profits via transaction fees.
Apparently, the concern is warranted. According to the Federal Reserve, not only are many Americans already past due on their credit cards, but the percentage of delinquency is increasing. Credit card delinquencies hit 4.86% in the first quarter of 2008 while revolving debt hit nearly a trillion dollars.
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Of course, credit card debt is not the only debt increasing. The American Banking Association quarterly survey revealed that consumers fell behind on their debt at the highest rate since 1992. Delinquencies across ALL eight loan categories increased. As the looming high-interest, credit debt continues to grow, consumers continue to get more behind and struggle financially. Perhaps, this is the greatest danger to consumers, the trap of mounting debt and eroding purchasing power.
Moreover, there is at least some evidence supporting that this debt may be going to cover necessities (instead of just furnishing living rooms with plasma-screens and buying burberry handbags). According to a Washington Post article, the new culprits of consumer debt are the rising costs of housing, education, and health care (not to mention food and gas). Housing, education, and health care costs have increased by 11.2% overall from 2001 to 2006. Between 2001 and 2004, the typical American family’s debt rose by a 33.1% while earnings have remained constant (some reports say that inflation-adjusted earnings have been flat since 1999). However, in the interest of balance, American families have not accordingly adjusted their spending habits (at least until recently).
In “perilous” financial times, the last thing you want is a mountain of debt hanging over your families’ heads. It is time to rethink the amount of debt you’re carrying today.
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Copyright 2008, Roshawn Watson, Pharm.D. All Rights Reserved.
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This is as dangerous as the housing and oil crisis if not more
It definitely doesn't get much play in the media but could have very grave effects.
This is a great article on debt crisis, where most of the people are suffering from credit loans. Credit card companies make a good percentage of their profits by surging credit cards usage. It is really a good time to rethink the amount of debt you're carrying today.===================================caroline16http://www.mydebtconsolidation.name