Should we be worried about the credit card debt clock?

[Tyler Durden]

I remember seeing a US debt clock page, but now we have a credit card debt clock for Australians here:

https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock

According to that, Australians with credit cards owe $36b in total, which means an average debt of $4,700 per credit card holder, paying $800 in interest per year.

Should we be worried? What happens if everyone defaulted on their credit cards? I mean, it's kinda different to mortgages because it's an unsecured debt, so would the consequences be serious?

Also, I am not sure how 'accurate' the painted picture is - does that mean people have a net wealth of -$4,700, or just that they have a debt of $4,700 but could have other assets worth more than enough to cover it?

Do you know anyone who thinks it's ok to just pay the minimum per month?

 

[Eager]

I remember seeing a US debt clock page, but now we have a credit card debt clock for Australians here:

https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock

According to that, Australians with credit cards owe $36b in total, which means an average debt of $4,700 per credit card holder, paying $800 in interest per year.

Should we be worried? What happens if everyone defaulted on their credit cards? I mean, it's kinda different to mortgages because it's an unsecured debt, so would the consequences be serious?

Also, I am not sure how 'accurate' the painted picture is - does that mean people have a net wealth of -$4,700, or just that they have a debt of $4,700 but could have other assets worth more than enough to cover it?

Do you know anyone who thinks it's ok to just pay the minimum per month?

We only use a credit card for convenience sometimes, and is generally paid off within the month. Haven't paid CC interest in years.

If people default on their debt, the Sherriff comes around and takes possession of goods. No problem!

But yes, credit for everyday stuff is too easy to secure, and the interest rate should be about 50% after 1 month I reckon.

 

[Glen48]

Many would use it to pay their credit card bill for the month.
Watch it increase

 

[McLovin]

Should we be worried? What happens if everyone defaulted on their credit cards? I mean, it's kinda different to mortgages because it's an unsecured debt, so would the consequences be serious?

An unsecured loan means creditors don't have a charge over specific assets. It doesn't mean they don't have recourse to the borrowers assets through the courts if they fail to pay.

 

[Starcraftmazter]

36Bn is relatively small to the $800Bn or so mortgage debt we have - which is what everyone should really be worried about. Total household debt is well over 100% of our GDP too - the highest in the world, and that's a hell of a lot to worry about.

We have the highest debt to income ratio in the world.



Even though it hasn't grown since our housing bubble peaked - it hasn't really gone down much either (Ruddprime's FHOB didn't help!).

The Australian consumer has a hell of a long way to de-leverage, and that poses all sorts of problems for the Australian economy.

 

[sptrawler]

I remember seeing a US debt clock page, but now we have a credit card debt clock for Australians here:

https://www.moneysmart.gov.au/borrowing-and-credit/credit-cards/credit-card-debt-clock

According to that, Australians with credit cards owe $36b in total, which means an average debt of $4,700 per credit card holder, paying $800 in interest per year.

Should we be worried? What happens if everyone defaulted on their credit cards? I mean, it's kinda different to mortgages because it's an unsecured debt, so would the consequences be serious?

Also, I am not sure how 'accurate' the painted picture is - does that mean people have a net wealth of -$4,700, or just that they have a debt of $4,700 but could have other assets worth more than enough to cover it?

Do you know anyone who thinks it's ok to just pay the minimum per month?

The credit card debt is getting payed down, that's what Jerry Harvey is complaining about.
The debt was nearly $50billion, less than 12months ago people are paying debt down quicker than ever before.
This is due to complete lack of consumer confidence, brought about by the fear of a terribly incompetent government.

http://www.australianbankingfinance.com/banking/consumer-caution-continuing--mastercard

 

[Starcraftmazter]

This is due to complete lack of consumer confidence, brought about by the fear of a terribly incompetent government.

So the highest private debt to GDP in the world caused by high leverage to overinflated property - at a time when property prices are going down has nothing to do with it?

The global economic crisis has nothing to do with it?

It's all the government is it?

 

[Calliope]

It's all the government is it?

But you're the guy who said;

"Anyone who trusts any government should probably be stripped of the power to vote."

 

[hangseng]

If people default on their debt, the Sherriff comes around and takes possession of goods. No problem!

Unless they die and have no assets. I was amased to see just this event panning out with a relative. Only a few months to live and I have found a major CC debt that she has no chance of paying off. Bank can send all the sherrifs they want but there is no assets or cash to draw on.

Who is at fault?

The person being an old lady with no idea what she is doing racking up the debt, treating it like cash in the bank and just paying the minimum payment from the pension? Or the bank for not checking who they give cards to in the first place and annually increasing limits like it was some form of gift?

In this case I lay blame squarely at the doorstep of the bank, irresponsible and complete lack of accoutability or checks in place. For the bank not a lot of money, but how many of these situations are there? I dare say quite a few that will simply have to be written off.

I have looked after this person for some time, paying out for unaffordable needs as they arose. But I never knew of this CC and was astounded when I saw how much was owing. I will continue to help here until the end but I won't be paying for the banks irresponsible ways, nor do I have to so the bank must write it off.

Do they make contingency for these situations? I am guessing they do and simply have it built into the exhorbitant interest rates and fees. If they haven't then another strike against the banks.

 

[Glen48]

That's why they charge so much interest to cover these situations.
I would be worried the bank will sell her house to recover the debt not knowing the full circumstances might be time to sell up and move to a home????

 

[McLovin]

Unless they die and have no assets. I was amased to see just this event panning out with a relative. Only a few months to live and I have found a major CC debt that she has no chance of paying off. Bank can send all the sherrifs they want but there is no assets or cash to draw on.

Who is at fault?

The person being an old lady with no idea what she is doing racking up the debt, treating it like cash in the bank and just paying the minimum payment from the pension? Or the bank for not checking who they give cards to in the first place and annually increasing limits like it was some form of gift?

In this case I lay blame squarely at the doorstep of the bank, irresponsible and complete lack of accoutability or checks in place. For the bank not a lot of money, but how many of these situations are there? I dare say quite a few that will simply have to be written off.

I have looked after this person for some time, paying out for unaffordable needs as they arose. But I never knew of this CC and was astounded when I saw how much was owing. I will continue to help here until the end but I won't be paying for the banks irresponsible ways, nor do I have to so the bank must write it off.

Do they make contingency for these situations? I am guessing they do and simply have it built into the exhorbitant interest rates and fees. If they haven't then another strike against the banks.

The bank makes more money from giving credit cards to all and sundry than by trying to enforce mortgage like lending standards. Hence the interest rate. From their perpective, it costs more to try and weed out potential bad debts than it does to just wear them as they occur. They ain't losing.

 

[hangseng]

That's why they charge so much interest to cover these situations.
I would be worried the bank will sell her house to recover the debt not knowing the full circumstances might be time to sell up and move to a home????

That was my point she has nothing, no cash or physical assets at all and the stupid bank gave her a credit card with a 20k limit, intially a 5k limit that just kept increasing at the banks will Now they have a debt or at least will shortly.

 

[sptrawler]

So the highest private debt to GDP in the world caused by high leverage to overinflated property - at a time when property prices are going down has nothing to do with it?

The global economic crisis has nothing to do with it?

It's all the government is it?

The highest private debt in the world and the gfc, didn't stop house prices continuing to rise in 2009 and early 2010.
Everything started to go pear shaped since the gillard minority government came in mid 2010. Have a look at the all ords against the dow, we are flat lining since these goons came in.
Also the house price slide started after the turmoil with labor started in 2010.
Your pretty good on the computer maybe you could throw up a couple of charts.

 

[Trembling Hand]

Have a look at the all ords against the dow, we are flat lining since these goons came in.

With that logic the Gillard gov must also be responsible for holding down all the other Asian indexes as well?

 

[Starcraftmazter]

But you're the guy who said;

"Anyone who trusts any government should probably be stripped of the power to vote."

Yes, and that - just like your post, has nothing to do with what is being discussed in the thread

The highest private debt in the world and the gfc, didn't stop house prices continuing to rise in 2009 and early 2010.

Are you trolling? I'm just curious. Have you heard of this thing called the first home owners boost? That is why house prices rose again - not because Australians are super-confident, but because a lot of demand was brought forward and a lot of people suckered in with a lot of money.

This has nothing to do with the Gillard government.

Everything started to go pear shaped since the gillard minority government came in mid 2010. Have a look at the all ords against the dow, we are flat lining since these goons came in.

Now I know you're trolling.

Also the house price slide started after the turmoil with labor started in 2010.
Your pretty good on the computer maybe you could throw up a couple of charts.

Err yeh sure - my favourite chart.



See where the prices start to go down in the GFC? That's the GFC.

See where they spike up again? That's the FHOB.

See where they resume falling again? That's because the effects of the FHOB have finished and we have the largest housing bubble in the entire world which is now collapsing.

 

[sptrawler]

Oh well SCM here is someone else who agrees with you.

http://australianpropertyforum.com/blog/entry/3206010/6114/

 

[Starcraftmazter]

Oh well SCM here is someone else who agrees with you.

http://australianpropertyforum.com/blog/entry/3206010/6114/

Anyone who doesn't - and in particular anyone who thinks it's the government's fault has some very very serious issues.

I sure hope their investment logic is better than their economics logic.

 

[sptrawler]

Anyone who doesn't - and in particular anyone who thinks it's the government's fault has some very very serious issues.

I sure hope their investment logic is better than their economics logic.

No, I've just blown my dough on a property. Guess I'll just have to live to 100 to see a profit.LOL

 

[Starcraftmazter]

No, I've just blown my dough on a property. Guess I'll just have to live to 100 to see a profit.LOL

Maybe if you are young.

The one good thing is, I feel very happy for the fortunate person or couple whom you bailed out by giving them market value for an asset which is experiencing significant capital loss and will continue to do so well into the future.

I'd like to think that they are smart and will rent from here on out.

 

[Glen48]

Once they all start to panic and the prices tanks another FHOB or some taxpayer funded scam will be introduced to prop up the government.
The smart ones are being hung out to dry for being smart and saving when they should be out pumping up the bubble.