Looks like the wave of credit card defaults is about to start

[TwixVoy]

http://www.bloomberg.com/apps/news?pid=20601213&sid=aInk6vXOwoB0&refer=home

"Feb. 19 (Bloomberg) -- Credit-card defaults may rise beyond 10 percent this year, breaking records and wiping out more than half of annual profit for lenders including Bank of America Corp. and JPMorgan Chase & Co., analysts said. "

How many people are aware the banks did the same thing they did with mortgages with credit cards? Yup you guessed right - they took that credit card debt and sold it out as "investments" to the open market. So we will see a domino effect here. Some of the investors of that credit card debt are banks themselves. This will cause many more banks to go under as a result.

We also are looking at a HUGE number of mortgages that will continue to fail over the next 2-3 years.

[bluestateguy]

1. I have adopted a pay-go approach with my credit cards

Only use what I can pay off on each month. DO NOT carry a balance.

[Bryn]

3. You're lucky

I did the same you do until my car broken down during the travel from Arkansas to Florida which cost me 1,200 to fix it using credit card which I carried for emergency. Then had to pay ER animal hospital upfront trying to save my hearing/signal dog (service dog) that caused my credit card to get maxed out. She died as a result of her "trusted vet" that gave her a combination of dexamethasone and rimadyl on same day (died from drug adversary within two days). She was only 6! Since then I've been trying to pay it off, but not possible because I am on fixed income. Yesterday I got a letter telling me that they are going to raise my rate from 12 to 22.9 due to "economic reasons..blah..blah". Guess I may have throw in towel and walk away! I was never late paying them.

[sandnsea]

7. That's horrible

Did you get another dog to help you?

[peacebaby3]

8. You should be able to opt out. Read the fine print and make sure you still have time. n/t

[TransitJohn]

14. You should tell them in writing

that you refuse the changes in interest rate. They will probably cancel the account effective at the expiration date on the card, but at leasy you wouldn't end up paying double the interest on the balance you're carrying until you get it paid off.

[Sherman A1]

11. It's the only way to do so

in my opinion (and I know there are folks who cannot), but I really like gaming their system for both the short term loan, the benefits (cash backs, rebates, etc) and the convenience of just carrying plastic.

I run everything I can through my Discover Card and pay it off each month. Builds up enough cash back that I then get gift cards for various merchants that I use as birthday or christmas gifts for nieces and nephews, saving me money in the long run.

[TomClash]

15. A wise old policy

that I follow too. Not so sure everyone can do that though.

[Selatius]

2. This could be another painful blow on the US economy in the coming months. nt

[Richard Steele]

4. 8 years of B*sh is going to take 50 years to fix. It's just that bad.

We haven't even SUSPECTED the bottom yet, let alone HIT it.

It's gonna be a few years before we even hit bottom on the course
that the Dubya Administration put us on.

[Jawja]

19. And didn't the Repukes pass a law not allowing

bankruptcy on credit cards?

[sandnsea]

5. Oh man, that is bad

Didn't occur to me that they'd done this with credit cards, but it should have. I hope everybody is near people they love.

[SeattleGirl]

6. This is such an ugly situation.

And yet the assholes who helped create this mess keep insisting that it's the "little guy" who caused the problems.

Fuckheads.

[lonestarnot]

9. I threw in the towel on one tonight. Raised my rate for being late one time.

Doubled my payment. Fuck 'em I say. Yeah bushitler fucked the world in many ways. :hi:

[rebel with a cause]

13. I threw in the towel eight years ago.

I had two store credit cards that I had used in emergency. I lost my job eleven years ago and could not obtain full time work. I continued to pay my bills, including the credit cards, from my unemployment and the part time work I did. At the end of three years I not only had not paid the bills down any but owed more than originally without ever charging any items on them. It seems that every month or so there would be a penalty added to my account for some unknown reason. Bills I would mail off two weeks in advance would not reach their destination until a week or two after the due date and I would be given a penalty and my interest raced. After three years of this, I ran out of money and patience. They are still after me today, and it is not the original holders but credit collectors from other corporations. My accounts were sold off years ago.

I am disabled and in failing health, but they are still pressuring me to pay the money and all that has been added to it. When I die they will probably go after my children. Sometimes I hope there is a hell so the corporations can go there as a group. Sorry, but not in too good a mood these days.

By the way, they have spent more trying to get the money I owe than what they would get from me if I could pay them off.

[Joanne98]

10. Here's a video. How credit cards become asset backed bonds..

http://www.youtube.com/watch?v=owPYO1D4d_A

They DID do the same thing. It's a short video and it explains what they did really well.

[lonestarnot]

24. Thanks Joanne98.

You deserve golden hearts! :hug:

[anonymous171]

12. All I can say is: Fuck

[depakid]

16. When the terms of the underlying assets (the credit card payments) jump to unsustainable levels

-as anyone who bought these securities surely must have known- the securities themselves become illiquid.

How anyone with half a brain who understands credit card company practices in the states wouldn't know that is beyond me.

Congress is now going to be forced to do something with respect to usury laws. A rough guess would be to limit interest to somewhere in the neighborhood of 14% and/or tie into some percentage above the prime rates.

[radfringe]

17. the higher they raise the interest rates the more defaults there will be

they've gathered all the golden eggs, and are now eating the goose

[CrispyQ]

22. "they've gathered all the golden eggs, and are now eating the goose"

Well said.

Stupid fucks. :grr:

[JVS]

18. They need to be nationalized before they fuck things up worse

[juno jones]

20. K&R!

Kick, rec and to the greatest for the perusal of the morning crowd! :)

[Stand and Fight]

21. And the bad news just keeps on coming...

Sigh....

[Tierra_y_Libertad]

23. The Titanic has yet to hit the actual iceberg.

And, the politicians and financiers are running out of deckchairs to maneuver.

[nc4bo]

25. K&R. My goodness gracious. Pitiful state we'll find ourselves in

this year and beyond.

An ounce of prevention could have stopped the madness or at least controlled it.

[JackRiddler]

26. Upshot: Will the government end up owning - and enforcing?! - this debt?

The following is from a thread of October 2008....


Consumer credit card debt is next stage of crisis... how will it play out?


So millions are losing their asset-shirts on the market, and hundreds of thousands have already been thrown out of their jobs. Cost of living ain't getting cheaper.

Credit card defaults will come on a record scale. Note that the highest profit margins for the banks through fees and interest are on the poorest debtors, the ones who will be first to default.

The collection agencies are likely to be overwhelmed. A lot of people will think it easier to throw up their hands and walk away from it, maybe not even take their chances with the new bankruptcy regulation but just stop paying.

Banks will be pressured - probably more so by whatever derivatives and swaps they've bought and sold on the basis of collateralizing their credit card accounts as assets.

See, as we've seen in the last few weeks, you can't pay off one card with another for very long, because the banks communicate and figure you out, but if they do the same on their level with hundreds of billions, they don't know about each other's true liabilities.

Uh oh, banks again don't trust each other. Again. Another liquidity crisis.

Doom imminent, we will be told. What's to be done? The dominoes must not fall.

So, call in the Treasury or the Fed, again, and they'll take over the defaulted credit card debt (plus assorted instruments, no doubt).

In other words, I'm thinking that millions of people will end up owing their consumer credit debt to the government. The same government that has built this enormous system of surveillance and contingency policing apparatus.

This will be in the next administration. What happens then?

Does the government forgive debts, and screw its own credit rating, or does it come down hard on all the little deadbeats?

Does it ask the defaulters to perform "community service"? Everyone's gotta sacrifice, right? Does it try to scapegoat the defaulters as the cause of all those entitlement cuts that will follow? (Does it cut the Pentagon? Ha.)

I'm kind of stumped about that. The enlightenment logic points to New Deal, sure, but I haven't heard anyone say that.

Could it be a pre-revolutionary situation - with Americans?! That's also a synonym for a potential fascist situation. (Like, really fascist, not just the many limited application of fascist tools we have already seen.)

Thoughts? (Please: No derisive sarcasm if you see flaws in the above. Just point out my errors.)

.

Looks like the first parts are now underway.

[Parker CA]

28. Could the gvmnt take over the debts from the credit card companies and offer true interest rates

that they offer to the companies directly to the consumers? Decreases of interest on that magnitude would not be a panacea for the crisis, but it would surely allow some more people to service their debts and manage them a bit better. I don't know how realistic that is, but rather than writing off as a complete loss and credit standing decrease, they could make the average citizen comparable to the companies for once and share the love a bit. Very unlikely, I'm sure, but I don't understand the complexities of this economic crisis even remotely as well as many.

[JackRiddler]

29. A debt can always be written down - especially the interest.

It's the way out of this crisis, if enough people see it.

You suggest the more optimistic version of what I wrote. The card debt that makes the banks insolvent is taken on by the govt., but they write it down at least in part and let the people loose from their bondage (whether they had been idiots in accumulating it or forced by circumstances is irrelevant).

I'm just afraid based on what we've seen for many years, the govt. will be more interested in saving the banks' credit-based derivatives through massive cash injections to them, and take on credit card debt just to make sure it's enforced by way of police (which is also a kind of jobs program, isn't it now?).

.

[dysfunctional press]

27. commercial real estate won't be far behind...

they did the same thing with commercial real estate- and lots of malls are losing lots of tenants