Credit Card Defaults Rose in April

They rose to record highs. And banks like Citigroup, Wells Fargo, JPMorgan Chase and Discover Financial Services are trying to figure out what to do. They’re raising rates, lowering limits, closing accounts and hiring psychologists to teach debt collectors how to persuade card holders to pay down their balance.

CNBC.com has the article: “Credit Card Defaults Reach Record Highs in April“

FRB’s Bank Card and Mortgage Delinquencies Map

This is a cool tool!

The Federal Reserve Bank of New York offers dynamic maps of bank card and mortgage delinquencies in the United States. It’s one of the coolest tools I’ve seen in a while.

The Credit Condition Map is actually fun to play with. The irony is that while you play with it, you’ll see some sad stats. The map offers two types of delinquency data: bank card delinquency rate of 60 or more days and mortgage delinquency rates of 90 or more days.

Credit Card Delinquencies Hit Record High

USA TODAY reports “More consumers fall behind on paying credit cards“.

As consumers lose access to home equity loans and lines of credit and as credit card companies change terms, consumers are being squeezed.

As a consequence of the credit crisis, Fitch Ratings expects credit card charge-offs to approach 9% in the second half of 2009. In other words, nearly 1 out of 10 credit accounts will be charged-off because the account holder cannot make payments.

Here’s how the downward spiral for credit card companies may play out. Charge-offs will increase as job losses and tight credit impact household wealth. In their efforts to compensate for the charge-offs, credit card companies will increase fees and raise rates. This will increase the number of card holders who cannot afford their payments.

And somewhere in all of this, what will the impact be of all those who can make their payments, but grow so disgusted with the lack of banking oversight, the bail out of poorly managed financial firms, and the absence of appropriate consequences for those who are scoff laws. At some point, I imagine only those with strong personal integrity or a sense of ethics will make payments to companies that seem to be extorting them by increasing rates and fees.

It’s not a pretty picture.

Consumer Borrowing Falls Three Months in a Row

“Consumer credit falls more than expected in Dec.“, reports that as of December 2008, consumers have borrowed less for three months in a row than anytime in the last 17 years. Why? Probably because banks and other lenders have a vapor lock on lending.

It’s not that massive numbers of consumers have suddenly seen the wisdom of saving. No. It’s because they can’t borrow money. Credit lines are being reduced. Home equity lines of credit are being cut.

Canadian Credit Card Bubble

It’s small comfort, but we in the U.S. are not alone in the credit card bubble.

ConsumerAffairs.com offers, “Canadians Crushed By Credit Card Debt: Loonie soars but so does unsecured debt”, an article from November 15, 2007 that begins, “the U.S. isn’t the only nation buried by massive consumer debt.”

Highlights about Canadian consumer debt:

90% of surveyed Canadians had more debt than five years ago
28% had no idea of what their credit card interest rate was
25% had between $10,000 and $40,000 (excluding mortgages)
53% had no budget

Guiding Financial Principal: Don’t Spend What You Don’t Have

In “Some Chuck Credit Cards to Avoid Late Fees, Debt“, good arguments are made for avoiding the use of credit cards – entirely.  Of course, the article also contains all the usual pro-credit card positions related to building a credit history, maintaining a high FICO score, and convenience.

And the article offers a few significant facts: 58% of people with credit cards don’t pay their balance in full each month and for those who don’t pay their balance in full each month, their average balance is $17,103.

The guiding financial principal of not spending what you don’t have is the philosphy of a 25 year old, New Yorker interviewed for the story.  She sounds like a wise young lady.

Consumer Debt, the BIG Picture from the Fed

The Federal Reserve publishes current data on the status of what they call “Consumer Credit”. The BIG picture is not improving. This month’s report states, “Consumer credit increased at an annual rate of 3-1/4 percent in January”. It continues, “revolving credit increased at an annual rate of 7 percent.” The full release is here: Federal Reserve Consumer Credit Report