Our financial system is crumbling this week.

[Freed Roger]

I posed this question on another thread (Where is the bottom?), but will ask again here:

I'm curious about is the state of credit card debt. Surely repayment of this debt is slowing and the debt level is going up. But I haven't heard much in the news.

How long can credit card lenders hold out with sluggish payment and default?

Or just as concerning, what happens if/when the availability of individual credit cards diminish? Won't spending come to a grinding halt?

Is this another time-bomb?

[Arthur Dent]

I'm curious about is the state of credit card debt. Surely repayment of this debt is slowing and the debt level is going up. But I haven't heard much in the news.

Why do you think so? I imagine that recession-like labor market conditions will increase debt, but so far, I don't think it's nearly bad enough to start tanking credit card companies. They may actually be more profitable if debt levels go up without too many defaults. I would think the bigger issue would be whether the card companies have access to enough credit to finance purchases, but given the interest rates they charge customers, they ought to still be able to find profitable deals.

But I'm really just guessing here. I have no real knowledge of their finances.

[AWvsCBsteeeerike3]

I posed this question on another thread (Where is the bottom?), but will ask again here:

I'm curious about is the state of credit card debt. Surely repayment of this debt is slowing and the debt level is going up. But I haven't heard much in the news.

How long can credit card lenders hold out with sluggish payment and default?

Or just as concerning, what happens if/when the availability of individual credit cards diminish? Won't spending come to a grinding halt?

Is this another time-bomb?

I haven't noticed my limits drop on any of my credit cards.....and I was qualified for way to high of an amt, imo, on most of them. I have 3 cards, long story as to why, but I was approved for 50K almost right out of collegeon 2 of them and 25K on another one. I don't carry a balance, but I would think credit card companies would drop these limits if they were feeling bad about things....don't know. Plus, even with thousands of dollars of debt, the minimum payments are not that expensive...like 50-100/month. Not that you'll ever pay it off that way, but you can stay afloat. I guess you're asking about when you're paying less than you're putting on there and eventually have no more credit on your card and can't really afford to pay it off.....yeah, that would probably be bad. But, again, I would think you'd see these companies dropping people's credits if they expected that to happen. Maybe they're just not very bright.

[BenNX74205]

I have 3 cards, long story as to why, but I was approved for 50K almost right out of collegeon 2 of them and 25K on another one.

You were approved for a FIFTY THOUSAND DOLLAR line of credit right out of college???

[Diddy]

I guess you're asking about when you're paying less than you're putting on there and eventually have no more credit on your card and can't really afford to pay it off.....yeah, that would probably be bad. But, again, I would think you'd see these companies dropping people's credits if they expected that to happen. Maybe they're just not very bright.

I was thinking about this the other day, even when people are just making min payments and spending more then they pay how does the 3% that the CC charges the business figure in that?

[Freed Roger]

I'm curious about is the state of credit card debt. Surely repayment of this debt is slowing and the debt level is going up. But I haven't heard much in the news.

Why do you think so? I imagine that recession-like labor market conditions will increase debt, but so far, I don't think it's nearly bad enough to start tanking credit card companies. They may actually be more profitable if debt levels go up without too many defaults. I would think the bigger issue would be whether the card companies have access to enough credit to finance purchases, but given the interest rates they charge customers, they ought to still be able to find profitable deals.

But I'm really just guessing here. I have no real knowledge of their finances.

I'm not sure - it just seems like credit card debt has been loose and fancy free for some time. (Sadly my household speaks from experience - we've abuse the cards, carry a balance.) Some of the same traits of the housing and mortgage crisis seem to exist with credit cards -such as people given too loose access to credit and living beyond their means.

I realize the card companies make money 2-4% of each transaction, and charge a higher interest rate, but at some point I wonder if personal consumer debt will reach a critical mass, especially with other negative factors in the economy and home equity loans wiped out.

Someone educate me.

[AWvsCBsteeeerike3]

I have 3 cards, long story as to why, but I was approved for 50K almost right out of collegeon 2 of them and 25K on another one.

You were approved for a FIFTY THOUSAND DOLLAR line of credit right out of college???

After working for less than a year. Pretty sweet, huh? I took out loans going through school and worked to pay them off while going to school and hadn't missed a payment. And, I had a credit card for students that I used to buy necessities like books and what not with a 1K limit that my parents paid for me....so I guess hitting half my limit and paying it off in two months and then the whole paying off the student loans thing did wonders for my credit. When I rented an apt, they did a check on it and it was over 800. Coupled with a decent job, I guess they felt I wasn't a risk....or they just had [expletive] practices....probably the latter.

[AWvsCBsteeeerike3]

I guess you're asking about when you're paying less than you're putting on there and eventually have no more credit on your card and can't really afford to pay it off.....yeah, that would probably be bad. But, again, I would think you'd see these companies dropping people's credits if they expected that to happen. Maybe they're just not very bright.

I was thinking about this the other day, even when people are just making min payments and spending more then they pay how does the 3% that the CC charges the business figure in that?

I always assumed they were separate.

If you spend $1000 at the store, the CC company gets $30. You, in turn, owe the CC company $1000 + whatever interest you may accumulate as you repay it....If you're making the min. payments, it may take a while and cost you a lot in interest. Assuming you do finally pay it off, this would be the best case scenario for CC companies.

[Popeye_Card]

I guess you're asking about when you're paying less than you're putting on there and eventually have no more credit on your card and can't really afford to pay it off.....yeah, that would probably be bad. But, again, I would think you'd see these companies dropping people's credits if they expected that to happen. Maybe they're just not very bright.

I was thinking about this the other day, even when people are just making min payments and spending more then they pay how does the 3% that the CC charges the business figure in that?

I always assumed they were separate.

If you spend $1000 at the store, the CC company gets $30. You, in turn, owe the CC company $1000 + whatever interest you may accumulate as you repay it....If you're making the min. payments, it may take a while and cost you a lot in interest. Assuming you do finally pay it off, this would be the best case scenario for CC companies.

Part of it is probably good credit history.

The other part is probably because they figure that people right out of college don't really know how to handle credit card debt yet, and will rack up tens of thousands of dollars worth of debt that they'll be paying off (with tons of interest) until they're in their late 30's. It's like advertising cigarettes to teenagers.

[TimeForGuinness]

Why is the dow up with all the other global markets down? Just because of rate cuts?

Give it time, it'll be tanking again by later today.

++

Interest rates are already low...I doubt going from 2.0% to 1.5% will help.