Credit card debt. People have learned nothing
 

Credit Card Debt Nears Toxic Levels

Updated: Sunday, 26 Feb 2012, 4:19 PM EST
Published : Sunday, 26 Feb 2012, 4:19 PM EST

(New York Post) - More American households are falling back into the debt hole, this time without the safety net of home values to help bail them out, the New York Post reported Sunday.

Last year, total US consumer debt reached its highest point in a decade, according to a credit card industry observer.

"Now more than ever, families need to work at saving and paying off any outstanding debts," said Howard Dvorkin, a certified public accountant and founder of the credit counseling service Consolidated Credit.

After a few months of reducing credit card debt levels, Dvorkin said, Americans are starting to return to their reliance on debt.

"People made some progress in reducing card debt earlier in the year, but in the last few months, as the stock market started to rise, they started to return to their old ways of charging things," he explained.

In December 2011, the total consumer debt -- which is the combination of non-revolving and revolving debt -- rose by some 9.3 percent to $2.498 trillion, according to the latest Federal Reserve Board numbers.

Both revolving debt and non-revolving debt increased. Revolving debt, which is credit-card debt, went up by 4.1 percent. Non-revolving debt, which includes loans for cars and education, rose 11.8 percent, the central bank's report said.

The trend -- month to month, quarter to quarter and year to year -- is rising steeply.

"Consumer credit increased at an annual rate of 7.5 percent in the fourth quarter. Revolving credit increased at an annual rate of 4.5 percent, and non-revolving credit increased 9 percent in December," the Fed wrote in a note along with the latest monthly report, which also reviewed 2011.

These numbers, Dvorkin warns, mean that many middle-class Americans are taking big risks.

In a weak economy with high unemployment, Dvorkin noted, many people with big card balances become vulnerable to financial catastrophe.

Lewis J. Altfest, a Manhattan adviser who targets professional, high-income clients, devotes part of his practice to telling the well-heeled how to cut back on credit card debt.

"It's still a big problem. Some people want to live life to the fullest even though they are using their cards too much," Altfest explained. He said many clients last year tried to reduce card debt. But some "are falling back into their old ways."

Indeed, last holiday season many consumers financed Black Friday trips to the mall and Cyber Monday online buying sprees by making purchases with plastic, Dvorkin contends.

"As the bills begin to roll in, consumers may find themselves unable to pay them off. It's good to see an increase in consumer spending, but never is it worth going into debt," according to Dvorkin.

Read more: New York Post

Read more: http://www.myfoxdc.com/dpps/news/cre...#ixzz1ndVa3Z7k

Now you know why it s seems that it isn't as bad as what you really know it is.

Don't own a single one. Guess I'm ok. though people try to tell me all the time that you need a couple for "emergencies".

I've faced plenty of emergencies and no credit card has gotten me out of them ;). SO I guess I'll keep on going as I am.

Here's the first 2 paragraphs of the actual FRBNY report

And a chart
http://3.bp.blogspot.com/-hPjnjcvA1e...YFedQ42011.JPG

Consumers are still deleveraging

Credit cards will get more people in an emergency situation than they have ever gotten out of one.

From that chart- I don't see that CC debt has increased that much. Housing debt did - then leveled off.

We checked DH's pay stub today- federal taxes - up $150 Per MONTH. Health insurance - Up $123 per MONTH. I don't even want to know what state taxes are and SS. Then there's the higher price of gas, food, and clothing. Ouch!! Fortunately, we read the smoke signals and relieved ourselves of all debt buy our home. So many families came into this financial crisis in the midst their own crisis totally unaware. I don't think they have any idea how to get out of it.

So sad.

Um, no.

Consumer indebtedness excluding mortgage and HELOC have increased. I'm pretty sure that's what the OP article said. That's what your link said.

Consumer's are not deleveraging in the housing market by choice. Underwater homes and tight lending force their hand. Low market price reduces equity, thus making HELOC difficult and unavailable to most. Mortgage and HELOC holders have no choice but to sit tight and make their payments.

While it's nice of you to paint a rosey picture with a graph, it's uneducated at best to draw a conclusion without considering all of the variables.

Many people use HELOC loans to pay off credit card debt. Then they fool themselves into thinking they have paid off their credit card debt. Of course that means they can charge the cards up to the max again.

By today's durable goods report I would say they are using them for food and mortgage pmts

I was surprised to see that CC debt was going up again. Made me sad.

There are different reasons why people accumulate credit card debt. For some it is just their irresponsible way of living - an entitlement attitude and wanting things right away. And income does not have all that much to do with it because you will spend up to and over whatever you make. Been there, done that.

For others it is a case of not planning and saving for emergencies because you think of your credit cards and lines of credit as your emergency fund. When the emergency hits it isn't long before you are up to your --- in alligators. Been there, done that.

For others it is simply that incomes are not keeping up with expenses. Even if you have trimmed your expenses to the bone getting rid of all wants and extravagances and just paying for needs those needs have skyrocketed in cost. So to just pay bills you use your credit but this adds up and adds up and you fall farther and farther behind or into debt. So far we are lucky and have not been there or done that. We know that we have to earn at least 10% more each year just to be able to stay current with new costs of living. You cannot stand still.

How many times have we heard a person say they paid off all of their credit cards?
Many times if you ask how they will say they consolidated them.
How is that paying them off?

Yes! That always makes me laugh (I deal with this in my work). It is their own wacky principle of revolving credit. I get particularly upset when they withdraw the capital in their homes to pay for consumer debt.

Yep.

Anything to stave off the inevitable for just a little longer.

Let's see- pay off your mortage and you will have money left over to pay off someone else's. Save money and you will have it to contirbute to bankers and brokers and pernsion funds and governments who lose on the stock market. And any bank account lets the government know where they can find money to bail someone out.
Hmmm....... makes a real case for savings, doesn't it?

Even though that is the truth it sounds kind of hopeless.

It's disheartening but not hopeless because the competent will simply work harder to stay in their comfort zone of independence.

Yes, I am one of those. I don't pay income taxes and do not expect anything from the govt. I live a rather nice life and it will not change by who is living in the white house or which party is in the majority. My life is not so controlled by politicians.

You're either making more money, or your withholdings are screwed up. There's no reason for this to happen, tax rates haven't changed.

All debt catagories are down versus Q4 last year except auto debt. Credit card debt is down 20% from the top. Total debt is down 12% from the high. It's deleveraging.

Or without looking at the data

We payed off our cards after we moved here. Trying to make sure we're completely out of debt when DH retires.

When you have no debt to service you actually have freedom of choice. To retire without any debt and savings is the only way.

I keep a credit card in my wallet. It's great for scraping frost off the car windshield.
jim

Our last credit card was paid off last month. No consolidation, no plans for another card. Card will be cancelled as soon as we get the 0 balance statement.

those of you who have credit card debt, and want to get rid of it, should follow dave ramsays advice. do the debt snowball. pay off the smallest balance first, then apply that payment to the next biggest debt. he has helped many people get their life back in order. once your debt is paid off, life becomes so much better in that you are now working for yourself. learn to live beneath your means, and you will usually end up ok. very simple concept, but so many people just don't get it. my father in law was a teacher, and later a financial planner. he would say how some people were dumber than trees regarding finances. these days it looks like many of those people are working in the federal government or for the banks.



keith