Credit Card Debt
Credit card debt cases are accelerated as we over leverage ourselves and live beyond our means. A continuous rise in the default cases is in turn weakening the complete financial system. The problem seems similar to the mortgages gone bad dilemma. People are lagging behind in their credit card payments, number of defaulters is rising, and the loan amount payments are getting larger.
Outstanding credit card debt which is posing a great threat for the financial institutions has amounted to $772 billion and this is a rather large reason to worry. The collective credit card debt in 2011 is expected to increase by $54 billion. Back in 2010, the addition to the new credit card debt was only $9 million whereas in 2009, credit card debt had seen a reduction.
In the first quarter of 2011, $18 billion was added to the credit card debt. Other than this the economy is facing a burden of $1.7 trillion from other debt like mortgages.
This news can be really bad for big credit card players like Bank of America and JPMorgan chase. The debt burden is already spreading its ill effects on the US financial markets thereby further weakening the economy.
The Federal Reserve data on credit card debt shows a higher increase. According to Mr Papadimitriou, the figures are misleading as they have not taken into account the credit-card issuers charge off. According to him, if the debt trend sees similar rise, then banks will have to sit back with heaps of bad debts and ordinary people will still continue borrowing more than their ability to repay.
Written by Fred Wilder Credit Card Debt Rise Alarming
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