Tag Archives: credit card debt

House of Cards Economy: Credit card debt surges $154 billion year after year now totaling $1.08 trillion

credit-card-debt

Important Takeaways:

  • Credit card balances spiked in the third quarter to a $1.08 trillion record. Here’s how we got here
  • Americans now owe $1.08 trillion on their credit cards, according to a new report on household debt from the Federal Reserve Bank of New York.
  • Credit card balances spiked by $154 billion year over year, notching the largest increase since 1999, the New York Fed found.
  • “Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth,” said Donghoon Lee, the New York Fed’s economic research advisor.
  • Credit card delinquency rates also rose across the board, according to the New York Fed, but especially among millennials, or borrowers between the ages of 30 and 39, who are burdened by high levels of student loan debt.
  • With most people feeling strained by higher prices — particularly for food, gas and housing — more cardholders are carrying debt from month to month or falling behind on payments, and a greater percentage of balances are going more than 180 days delinquent, according to a separate report from the Consumer Financial Protection Bureau.
  • Nearly one-tenth of credit card users find themselves in “persistent debt” where they are charged more in interest and fees each year than they pay toward the principal — a pattern that is increasingly difficult to break, the consumer watchdog said.

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Rise in Bankruptcy, Credit Card debt, and weakening stock market: Is the US headed for recession?

US-Bankruptcy-chart

Important Takeaways:

  • The rise of the MEGA bankruptcy: 459 US firms have filed for bankruptcy this year – the most since 2020 – and 16 had more than $1 billion in assets
  • Large-scale corporate bankruptcies are at their highest level since 2020 as elevated interest rates continue to batter businesses.
  • Economists warn large-scale bankruptcies can have devastating consequences
  • Some 459 firms filed for bankruptcy so far this year – already more than in 2021
  • Bed Bath and Beyond, trucking firm Yellow and Silicon Valley Bank among the biggest casualties
  • David’s Bridal have filed for Chapter 11 bankruptcy thanks to a perfect storm of rampant inflation, high rates and supply-chain disruptions.
  • Economists warn the rise in large-scale collapses can have devastating consequences on the economy.
  • For example, the demise of trucking firm Yellow – which reportedly had $2.15 billion in assets at its time of filing – reverberated through domestic shipping and real estate markets to Wall Street.
  • The rise in bankruptcies coupled with a weakening stock market and surge in credit card delinquencies has sparked fears the US is heading for a recession.

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Global Debt reaching $307 Trillion, and America hitting $33 Trillion in debt itself: Could the Black Horse from Revelations be galloping?

Important Takeaways:

  • Setup For The Black Horse: The World Is Teetering On The Edge Of Bankruptcy
  • The global debt clock is spinning, reaching a record-high of $307 trillion this week. What does this mean?
  • The amount of debt grew by around eight to ten trillion in just the first quarter of 2023 alone. It was recently reported that “The majority of low-income nations are on the cusp of a debt crisis, sparking fears of global contagion.”
  • The global debt virus has infected the international economic system, and the world is teetering on the edge of bankruptcy, especially in many of these low-income nations. US debt just surpassed $33 trillion this week. Last month, Credit card debt, for the first time in American history, eclipsed $1 trillion.
  • The US national debt is projected to exceed 100% of gross domestic product in the next two years. In around six years, the national debt is said to exceed its all-time high of 106% of the gross domestic product, which occurred in 1946, the year immediately following World War II. We know why we had so much debt then, but now it’s simply a result of runaway spending that politicians are not able to curtail.
  • The cover of Newsweek from several years ago grabbed my attention. The front of the magazine read, “How Great Powers Fall,” showing an upside-down US Capitol standing on its dome. The cover further displayed the quote, “Steep debt, slow growth, and high spending kill empires. And America could be next.”
  • According to the article, “Habsburg Spain defaulted on all or part of its debt 14 times between 1557 and 1696 and succumbed to inflation due to a surplus of New World silver.”
  • “Pre-revolutionary France was spending 62% of royal revenue on debt service by 1788,” the author described.
  • Ferguson noted that the Ottoman Empire went the same way: “interest payments and amortization rose from 15% of the budget in 1860 to 50% in 1875.”
  • There’s a quote by a best-selling author named Robert Kiyosaki, “When people are struggling financially, they’re more willing to have a government save them, unwittingly exchanging their personal freedom for financial salvation.”
  • We know that during the tribulation period, the third horseman of the apocalypse is riding a black horse and carrying “a pair of balances in his hand” (Revelation 6:5)

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Pandemic led to U.S. housing boom, reduced credit card debt, New York Fed says

By Jonnelle Marte

(Reuters) – The coronavirus pandemic changed the way U.S. consumers use credit, as lower interest rates spurred a boom in home buying and refinancing and virus-related shutdowns led to a drop in credit card use and an increase in paying off debt, according to a report released on Wednesday by the New York Federal Reserve.

Total household debt last year increased by $414 billion to $14.56 trillion at the end of December, the New York Fed found in its quarterly household debt and credit report.

“The COVID pandemic and ensuing recession have marked an end to the dynamics in household borrowing that have characterized the expansion since the Great Recession, which included robust growth in auto and student loans, while mortgage and credit card balances grew more slowly,” New York Fed researchers wrote in a supplemental blog post published on Wednesday. “As the pandemic took hold, these dynamics were altered.”

Mortgage balances, which make up the largest share of household debt, grew by $182 billion in 2020 – the largest increase since 2007.

Home buying and refinancing took off last year after the Federal Reserve slashed its key overnight interest rate to near zero to fight the economic fallout from the pandemic, leading to lower mortgage rates. A massive shift to working and learning from home also bolstered the housing market, as some families searched for properties with more living space.

Credit card balances increased by $12 billion in the fourth quarter but balances were still $108 billion lower from a year earlier – the largest yearly decline since the report was launched in 1999.

The year-over-year drop is a sign that many credit card holders reduced spending and used pandemic relief checks to pay down their card balances, researchers said. That is in line with earlier research from the New York Fed that found 35% of direct payments received last year were used to pay down debt.

Meanwhile, auto loan balances increased by $14 billion during the fourth quarter and student loan balances rose by $9 billion, the New York Fed’s latest report showed. In total, all household debt not related to housing – including credit card debt, auto loans, student loans, and other debts – increased by $37 billion during the fourth quarter but was still below pre-pandemic levels seen at the end of 2019.

(Reporting by Jonnelle Marte; Editing by Paul Simao)