In case you didn’t know, there is another bubble, growing massively in this country, preparing to burst. Revolving consumer credit card debt continues to grow each month, finally breaking the $ 900 billion mark for the first time last June. The Federal Reserve reports that this year, Americans have amassed $ 39 billion in new credit card debt. We refer to the looming crisis as the credit card tsunami. You better close the hatches!
For the month of August 2007, US consumers added another $ 6.2 billion in new debt, on top of the $ 5.6 billion they accumulated in July. Overall, including everything except mortgages, Americans owe nearly $ 2.5 TRILLION in debt! Now that the mortgage game is over, and you’ve won all that easy money, the next big thing banks will leverage for maximum growth and profits is cards. Fees and penalties have been rising steadily for years, as have average interest rates. Last year, banks earned more than $ 100 billion in interest and another $ 50 billion in fees and penalties; these guys are not your friends.
Many people, who are being pressured by the bursting of the housing bubble, depend more and more on their credit cards to live. Since the tap on home equity money has run out, and their lifestyles don’t change, or circumstances like job losses or medical difficulties keep them relying on credit cards, there is no end in sight to the amount of additional debt John Q.Public will assume. At some point, the dam has to burst and many people will drown.
Who knows how many people have lived beyond their means over the past few years, extracting temporary wealth from their real estate, only to spend it on luxuries like vacations and lavish weddings in Tuscany? How many people transferred unsecured credit card debt to their real estate, only to risk foreclosure if they miss some payments? What about the people who thought the value of an already overvalued home would continue to rise and took out mortgages with teaser rates, hoping to refinance with the earnings in a couple of years, and now they are stuck with a mortgage which has been duplicated, and in no way? to pay for it?
Now that the game is over, those people are turning to their credit cards to survive. People who were “hooked” on teaser rate mortgages now find themselves unable to pay their “real” mortgage payment. Many are defaulting on their mortgage and keeping up with their credit cards. Some are using them like an ATM, pushing them to their limit, as well as constantly requesting the barrage of new cards adorning their mailbox.
They live in a fantasy land if they think late mortgage payments won’t hurt their credit. Give it a month or three, and when the credit cards see that you are missing your mortgage, they raise your interest rates to more than 25% and then you are, forgive my French, “screwed.” Most of your payment will be wasted on interest and it could take 10 to 100 years to pay off the debt.
Card companies know that people will do anything to keep up with cards and that people need cash. The requirements to obtain a credit card are the lowest in 10 years according to a survey of the Fed; if you have a pulse, you can get a credit card. They even give credit cards to people’s pets.
The junk mail credit card applications that grace your mailbox are brought to the post office in semi-trailers on pallets and unloaded with forklifts. While mailings are actually less than what was mailed at their peak in 2005, the percentage of people who responded and were accepted by credit card companies has risen steadily and has actually tripled since 2005.
All of this is the result of the closing by taking equity out of your overvalued home. It was never sustainable, and I feel sorry for the people who bought at the peak, paying $ 600,000 more for a 40-year-old house that wasn’t worth 1⁄4 of that price. To think that the bubble could continue to grow and that the median price of a house exceeded the ability of the average person to buy one, it was only a matter of time before something had to give, and it has.
Now, I talk all day with people who take credit card cash advances to live on or pay off their mortgages; that will end at some point.
The credit card bubble will be the next to burst. If your credit card debt is out of control, you must do something. Through the debt settlement process, there are ways to settle with your creditors for less than what you owe, within 3-4 years, which will leave you in a position to obtain new credit once it is finalized. Read our free report on debt settlement to see if it’s an option for you.
