Are Consumers Really Paying Off Credit Cards?
A report out this week says that Americans reduced their credit card debt by $93 billion between 2008 and 2009. This could be seen by some as good news. Experts are not convinced. According to an analysis of federal data by cardhub.com, a credit card comparison site, during the third quarter of last year, bank charge offs reached their highest rate since it peaked in 1985. Charge offs normally occur when a consumer declares bankruptcy or when their credit card is over 180 days past due.
The analysis performed by cardhub.com found that 90% of the $93 billion credit card debt was allocated to bad credit write offs. The analysis showed that only $ 10 billion was related to consumer payoffs. This analysis brings new light to the process of reporting the true numbers. Consumers are looking for any news that would reveal a recovery in the financial sector.
Many news outlets are looking for ways to soften the idea that we may still be in the middle of a full-blown recession. The recovery that has occurred can be attributed in part to stimulus funds that are currently working their way through the American system. Those funds have created an environment that, if allowed to continue, would help lead the American people out of the welfare offices and back into sustainable jobs. The important issue is this, it takes time.
The other important issue is regulation. Gone are the days when we should just sit back and watch the largest financial institutions, which created this fragile economy, lead us further into bad financial corners that require the consumer to bail them out. Currently on Capitol Hill, Senator Chris Dodd (D-Connecticut) is working to create banking and financial institution regulations that will hold the institutions accountable and force them to treat the consumer with respect instead of the current abuse we have witnessed.
As we have reported, federal regulations for credit card companies went into effect last month, these regulations will be followed by more rules that will take affect this summer. The banking regulations being proposed by Chris Dodd and others will create an environment for the average American that allows them to protect their financial future and remain assured that the institution they are working with is held to the same standards as their local banking system.
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