Credit Card Debt Hits 8-Year Low

[RamboLiberal]

Source: CBS News/AP

The amount consumers owed on their credit cards in this year's second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.

The average combined debt for bank-issued credit cards like those with a MasterCard or Visa logo fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.

The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.

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Reflecting the weak economies in the states hardest hit by the housing crisis, the delinquency rate was highest in Nevada, at 1.5 percent of cardholders, followed by Florida, 1.24 percent, Arizona, 1.11 percent and California, 1.08 percent. In all, 16 states fared worse than the national average for delinquencies.

Read more: http://www.cbsnews.com/stories/2010/08/25/business/main6803882.shtml?tag=stack

[ixion]

1. If we can get CC debt to zero, we can kill the CC companies

:woohoo:

[Turbineguy]

2. Not really

since they get a commission on the sale.

[northernlights]

4. which is fine

that is a legitimate business. Using credit cards as an interest free loan that you pay off monthly to avoid toting around cash that is more likely to be frittered away or stolen, makes good sense.

It's the late fees, penalties and usurious interest rates that take advantage of the most vulnerable that are immoral and should be illegal.

But since the government won't step up to the plate, putting the greedy hogs on a serious diet is an equally good -- if not better -- option. :D

[Turbineguy]

6. I agree.

There was a time that there was a limit of 12%. Obviously 27 or 29 percent is absurd if you are late with a payment.

[ejpoeta]

10. especially when you have companies changing around due dates to ensure you are late.

or holding onto payments and ensuring they are late.

[davidwparker]

14. which is why I have weekly payments sent from my

credit union weekly. I have the amount drawn out my account and periodically check when the payment is applied.

And, with weekly payments, it continues to lower the average daily balance during the month rather than one time a month.

[ejpoeta]

26. i pay double the minimum every paycheck

[xxqqqzme]

24. What's late.

I still had my rate jacked to 29% even w/ auto pay to avoid late charges.

[Sherman A1]

7. Precisely

The key to the game is to out-game their system whenever you can. If you use them as a convenience and a cyclical short term loan system, engage their bonus programs then you win and not them.

I can fully understand being deep in CC debt, I was there after a divorce and had to use them to get by for awhile as there was no real option, so while I paid what I considered excessive interest rates, I did so knowingly and with an eye towards working my way out of the problem.

They are simply a tool to use and like any tool can be misused.

[aquart]

3. Has misfortune brought us to our senses?

I use my debit card and carry a straight credit card for emergencies which I almost never use.

[northernlights]

5. yes.

I work in a mutual fund call center. A lot of people have been closing out their funds -- many have said up front it's to pay off credit cards once and for all.

When they do the simple arithmetic they realize that the interest they're losing on the credit cards far outweighs any miniscule capital gains, dividends or interest on the mutual funds.

[aquart]

8. Interesting to hear.

[davidwparker]

15. oh, absolutely.

I foolishly used one when I was debt free (except for mortgage) to make home improvements before the market collapsed.

NEVER again. CC are to be used only for an emergency.

Lesson: Save for it and while saving, do without.

[SomeGuyInEagan]

16. For the moment ...

... but Americans - as a group - have a very short memory.

[Smarmie Doofus]

9. Don't have one. Don't want one. One drawback, however:

it's hard to establish good credit rating if you're looking for a mortgage.

[Lucky Luciano]

11. Then maybe you should get one.

:shrug:


I like Amex since you HAVE TO pay it off end of month and you get points that you can use to get rewards. Some of their travel perks ate good too.

My rent is paid on my Amex too which accumulates points very fast.

[Turbineguy]

12. I've moved a number of bills

(phone and such)onto my Amex card.

I use one card strictly for automobile expenses.

[davidwparker]

17. consider using your financial institution's bill payment

feature. I have my bills go to it electronically and just make a couple of clicks to pay it.

No stamps. No paper bills.

The one my credit union uses is very good.

[SomeGuyInEagan]

18. That is how we use our cards ...

Any expenses that can go on the AMEX card does, paid off monthly, collect the points for cash back or airfare, which more than pays for our annual fee. Credit unions oftentimes offer cards without annual fees, though I am not sure if those come with point offers.

Plus, it is another line of credit *should* you have an emergency expense that cannot be covered out of savings.

[Fearless]

13. Or maybe because people know they don't have money...

Companies aren't giving them cards anyways,and so on.

[AllTooEasy]

19. On top of that, more good news

I watched Rachael Maddow last night and she pointed out something. Thanks to Obama's new credit card rules, CC companies can't make money on hidden fees, jacking up rates on previously purchased items at lower rates, and other scams. As a result, they are raising rates to stay afloat. Rachael thought this was unclassy, but think of the result:

Americans will use credit cards less and actually save up the cash before purchasing! No interest payments on cash. More money over the long run as well.

I'm loving it. Please corret me if I'm wrong.

[Dawson Leery]

20. Cash, Checks, and Debit Cards.

Credit Cards are used in our house for ONLY major purchases (vacations, car rental, etc). The bill is paid in FULL every month.

[KurtNYC]

21. What a load of crap -- They CUT EVERYONE's limit

the banks got a bailout then THEY cut everyone's credit. And raised rates.

But hey, if you have customers (the tax payers) who are stupid enough to make a huge unsecured loan to people who won't even tell you what they will do with the loan (the remaining banks), then your credit rating SHOULD suck.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adCwmmkzFI3U

"About 45 percent of U.S. banks reduced credit limits for new or existing credit-card customers in the fourth quarter of 2008, according to a Federal Reserve January survey of senior loan officers."

[OnlinePoker]

27. Not necessarily

In the last couple of months, both my CC and credit union line of credit were jacked up without my approval, essentially doubling the available credit I have. I've never used the line of credit in the 6 years I've had it and pay my CC off monthly and haven't paid interest in over 10 years. When I found out about the raise in limits, I immediately called both institutions and had them dropped back to my original limits. If I want to take on more debt, or potentially more debt, it should be my choice, not some number in an office somewhere.

[melm00se]

32. there is a part that this article doesn't address

other than minor lip service.

an account's credit line (whether in use or not), for loan loss reserve calculations, is viewed as the total loan amount. So a bank is required to hold back X% of that total loan amount in case of default.

IOW, a $10K line of credit (even though the balance is only $2500) is viewed as the equivalent of a $10K loan and the lender has to hold back enough funds to cover anticipated losses (after all they are loaning their depositors money).

this action was taken by banks (believe it or not) in response to the 2008 changes in capitalization requirements (Base II)...talk about the law of unintended consequences...banks were required, in response to the faltering worldwide banking and economic system, to hold back more $$$ to cover anticipated losses (this was to avoid the repetition of the bank runs of the Depression Eras and the 1980's savings and loan crisis).

Banks also cut credit lines in response to the federal government's request that they make more $$$ available to lend as the credit markets were extremely tight as banks pulled back from lending (if you have to hold back money to cover possible losses you can't lend out that $$$).

the series of actions taken by the federal government in 2008 really created a whole lot of confusion as they were, in essence, contradictory: lend more, but hold back more to cover the potential losses...where was the $$ supposed to come from?

[Blue_Tires]

22. good to see people wising up...

[alstephenson]

23. Amazingly LOW delinquency rates!

I would have thought that the delinquency rates would be much higher in this economy.

[OnlinePoker]

28. Could be the delinquents from past months have gone bankrupt.

This would have the double impact of lowering both the overall outstanding CC debt and the delinquencies.

[4_TN_TITANS]

25. I'm betting bankruptcy played a huge part in this.

How can people coping with record unemployment suddenly pay down cards? It's gotten down the card holders who can manage their debt.

[rayofreason]

29. "In all, 16 states fared worse...

...than the national average for delinquencies."

OMG!!! Someone was WORSE than average!

I am always amazed how innumerate idiocy can pass for journalism.

[Flying Squirrel]

30. If you filed bankruptcy, it's no longer counted as debt.

I'm sure that's the reason. Plus people aren't being granted more credit, so they can't rack up the cards.

[customerserviceguy]

31. I'll confess, I've bucked the trend

Whenever I go on vacation back in the Pacific NW, I do tend to run up the plastic. But I come back home with some really great bottles of wine in my check-in luggage!