Not even in the same ballpark as the mortgage crisis. There's roughly $1 trillion in credit card debt...there was around $15 trillion in mortgage debt out there. If the mortgage crisis was a financial tsunami, this would look more like financial high tide.
Agree. But I think this has as much potential to make life miserable for a large number of Americans and possibly over a longer period of time, particularly given the new bankruptcy laws.
Exactly. Also interesting that the primary banks in trouble regarding this are JP and BoA. Both of whom have managed to skirt through the current mess better than most. BoA reported on 10-06 that 3 billion of it's 184 billion dollar credit portfolio has soured. A 50% increase from last year. JP now has WaMu's credit portfolio - of which 45% is considered subprime. Source: Business Week
Tough to feel sorry for them when they are at college campuses handing out credit cards knowing FULL WELL that these kids ain't gonna be paying off the balance in full every month like they should. Also tough to feel sorry for the Americans out there who build up thousands of dollars in credit card debt by buying a bunch of crap they know they can't afford.
Agree completely. Americans, for the most part, are credit r****ded. I will admit, from the end of high school through college, I knew very little about credit and how to build my credit score. Luckily, I worked through school and had school paid off and didn't have much CC debt. However, my score still sucked. The problem is, the system is broken. People don't understand how credit ratings work AND we have lenders that fully intend to punish those who don't understand the complex contracts that are credit cards (gotta love when you miss one payment and your rate gets maxed out to 10000000000%). If we had better education about money management and credit from a younger age, we'd be much better off as a country.
We need to stop this... Are you kidding me? That is absolutely unsustainable on a personal and societal level. Cutting back will not be pretty. Paying for past excesses will further cut into what can be bought in the future. We have so much invested of ourselves in stuff that all of a sudden making the transition to not having as much stuff or stuff that people think is somehow beneath them will be a major sociological and psychological change. Those big flat screens, those leather seats in "luxury" automobiles, the granite counters, the chef quality appliances, the sea-doos, the pampered vacations, the 'quality" clothes, the $50 game cartridges (are we insane?) the casual airplane flight to see friends, the weekend in Vegas... all those things are going to go by the wayside for many folks... and they will not be happy.
unpaid credit card debt can have worse effect on the economy than the mortgage crisis, becasue when you messup your mortgage you can turn around and live in an appartment, but when you mess up your credit you are pretty much out of luck in today's world. In an economy that depends on spending to flourish, people will not be able to buy or borrow with bad credit.
But, mortgages secure an asset you can repossess. And, it is a lot easier for borrowers to walk away from a credit card debt than a mortgage debt. People will concede to defaulting more easily and credit card companies will not be able to repossess.
That used to be the case, but the recent bankruptcy bill turned things upside down, thanks to sell-outs to the credit card industry lobbyists (Biden... you better redeem yourself and fix this quick), and now it is more advantageous to walk away from a mortgage than to default on credit cards. Unfortunately, if one happens, the second is a good bet to follow. Now, you walk away from a mortgage, it stays with you for 7 years. Walk away from credit cards and they can haunt you til death.
Another reason why every single high schooler in America needs a personal finance class that covers basics like credit card debt, mortgages, and taxes.
this isn't an all or nothing deal. there will still be credit card companies. there will still be available credit. they will be more careful and the limits they offer won't be as high. but there's a lot of money to be made in the credit card game.
