September 22, 2010
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News: Are Americans Really Paying Down Debt?
A recent report from the TransUnion credit reporting bureau has sparked some controversy over the U.S. credit card debt. Over the past year, reports by the Federal Reserve have indicated that Americans have progressively reduced credit card debt, however, another story is told when examining all the variables of involved in card debt. All U.S. card issuers have reported on the burdensome charge-offs over the past 18 months. Accounts that are 180 days past due are written-off as debt that is uncollectable. These accounts are virtually erased from the banks books. According to the Federal Reserve report, credit card companies wrote off nearly $21.8 billion in bad debt. During that same time period, cardholders reduced card debt by $12 billion when compared to the previous quarter. Some experts believe that when you subtract one from the other, it indicates that Americans actually spent $9.8 billion more.
The TransUnion report indicated that for the first time since 2002, the average credit card debt fell below the $5,000 mark. Over the past quarter, Americans reduced card debt to $4,951 down from the previous quarter of $5,719 the same time last year. Although some experts believe that this reduction in credit card debt is nothing more than a result of excessive card defaults, others believe that many Americans have tightened their belts and use debit cards when swiping.
There is however, one thing that you just can’t argue; over the past several months, lenders have reported a decrease in credit card delinquencies. This is important because delinquencies become defaults. If delinquencies decline, defaults will also decline. The unemployment rate doesn’t help matters much either. If the nation is to get back in balance, Americans must continue to pay down debt while increasing spending in order to foster a healthy economy. Unemployment has hovered around the 10 percent mark leaving many Americans without sufficient money to pay mortgage payments. As a result, more and more Americans have chosen to walk away from their homes. Any way you look at it, things are not good for anyone these days.