March 17, 2010
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News: Did They or Didn't They?
It has been widely reported over the past six months that Americans have made a concerted effort to reduce credit card spending. However, new information indicates that Americans may not have done such a good job after all. According to the Federal Reserve, recently reviewed data indicates that the reduction in U.S. overall credit card debt may actually be due to activity conducted by the lenders rather than the consumer. The report indicates that record-breaking highs of credit card write-offs undertaken by lenders may have produced misleading information. Consumer debt which is 180 days or more is assumed to be uncollectible and written off by lenders thereby lowering the nation’s overall debt.
Just last month the Federal Reserve released data that indicated that, during the year 2009, Americans had reduced credit card debt by nearly $1,700 per household. That report showed an overall reduction of $91 billion. Additional reports indicate that lenders wrote off nearly $83.3 billion in delinquent card balances. The difference would be a more accurate representation of the amount Americans reduced credit card debt.
While the Federal Reserve data indicates that Americans have been reducing credit card debt consistently over the past 16 months, a CardHub study shows that when you factor out write-offs, the first quarter of 2009 was the only real time consumers reduced debt. According to that report, during that quarter, cardholders’ account balances fell by $46.9 billion in addition to another $17.59 billion in write-offs. From that point on, the CardHub reports showed little or no change in card balances. One of the hardest hit lenders was Bank of America ,which reported a high of 13.5 percent in December. Although defaults are believed to have peaked in January, experts say the nation still has a ways to go before it sees any significant relief. Furthermore, the U.S. continues to deal with high unemployment rates leaving many individuals to depend even more on credit