Should we be worried about the credit card debt clock?

[sptrawler]

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.

I might have to get my pliers out and come out of retirement.

 

[Starcraftmazter]

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.

It's definitely possible. The issue is that there are only so many times that will work - and there is only so much demand that can be brought forward. There is also only so much debt the government can incur by continuously doing that.

 

[damien275x]

Pumping the bubble - that reminded me of that beat the bomb game they used to play on 101.1 .. I went on it once.. tick tick tick... $200.... $400... $500... $1000... $2000 *BANG* you just never know when it will go bang. You'd rather take your chips off the table and not play that game.

 

[Tyler Durden]

Relevant article:

MOUNT DRUITT, Campbelltown and Liverpool have emerged as Sydney's bankruptcy hot spots as families succumb to mounting credit card debt and chronic unemployment.

The three suburbs topped a list compiled by the federal agency Insolvency and Trustee Service Australia, which revealed the NSW postcodes most vulnerable to bankruptcy last financial year.

The 2770 postcode - Mount Druitt, Minchinbury and surrounds - was the worst affected, with 163 bankruptcy declarations.

In the Campbelltown area postcode of 2560, 146 debtors slipped into the red, closely followed by 144 in the Liverpool-Casula postcode 2170.

The central coast postcodes of 2259, 2250 and 2261, which centre on Lake Munmorah, Gosford and The Entrance, rounded out the top six with 100 or more bankruptcies each.

It is the first time ITSA has published personal insolvency activity by postcode. The data is not adjusted for the variation in population between postcodes. Sydney's well-heeled suburbs were not immune to financial distress. In the wealthy 2088 postcode, which includes Mosman and Spit Junction, 22 debtors filed for bankruptcy. It was closely followed by 19 in the 2030 postcode of Dover Heights and Vaucluse.

http://www.smh.com.au/money/mountin...y-boom-in-western-suburbs-20120410-1wn1f.html

 

[Tyler Durden]

Contrary to the point of the article, looks like it has gone down a bit from $36b when I first made this thread:

Despite falling interest making it easier to pay down loans, Australian households now owe almost $1600 billion, a 28 per cent rise in just five years, and economists say our personal borrowing levels are among the highest in the world.

The latest Reserve Bank of Australia figures show housing debt is the biggest factor. Meanwhile, people are paying high interest rates ”” averaging 17 per cent ”” on almost $33 billion of credit card debt that fails to get repaid every month.

http://www.news.com.au/finance/mone...-billion-in-debt/story-e6frfmcr-1227289530147

 

[skcots]

Contrary to the point of the article, looks like it has gone down a bit from $36b when I first made this

The original link indicates that we are currently $43 billion. I just had a look around and another estimate is $49 billion.

I guess it depends on where the data is coming from.

 

[Mrmagoo]

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?

I used to work on a customer service line at a bank and -4.7k with no savings seems oddly familiar.

 

[Smurf1976]

I used to work on a customer service line at a bank and -4.7k with no savings seems oddly familiar.

Some people must owe an awful lot given that there are others, like me, who pay the full outstanding balance each month and thus pay zero interest.

 

[IFocus]

Some people must owe an awful lot given that there are others, like me, who pay the full outstanding balance each month and thus pay zero interest.

I just find it weird anyone would pay 17%, like you Smurf had a credit card for ever and move 99% of my transactions through it but never ever pay interest. Only linked it the other day to a saving account so i could get cash occasionally.

 

[Tyler Durden]

I just find it weird anyone would pay 17%, like you Smurf had a credit card for ever and move 99% of my transactions through it but never ever pay interest. Only linked it the other day to a saving account so i could get cash occasionally.

It's probably unbelievable to us who have some degree of financial literacy and have an interest in money, but there are lots of people out there who just don't care. I remember when I was growing up, my mum would buy things on her credit card, and once when I asked how we could afford to pay it back, her response was "don't worry, just worry about it when the time comes".

 

[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?

Fast forward 4 years and the total owed by Australians has been reduced to $32b, giving an average debt of $4,300 per credit card holder, paying $735 in interest per year.

Looks like Australians are doing the financially savvy thing by paying off their credit cards.

 

[sptrawler]

Fast forward 4 years and the total owed by Australians has been reduced to $32b, giving an average debt of $4,300 per credit card holder, paying $735 in interest per year.

Looks like Australians are doing the financially savvy thing by paying off their credit cards.

The good thing about credit card debt, it allows the want it now people to get it, also gives banks easy income to give out dividends.
Win win situation.
If the financially challenged, weren't spending the money on themselves, what would they be spending their money on?
I personally, would rather see them buying a $400 t.v on credit, than punching $400 through the pokies. Just my opinion.

 

[sptrawler]

This is the whole problem regarding debt, gambling, smoking, drug use, etc.

You can't legislate, to stop people doing, what they want to do.

All they will do is find another way to circumvent, the impost.

As with tobacco, just keep making it more expensive, until lifestyle choices must be made. Eventually everyone reaches a limit where they say "I can't afford this".
Some will turn to crime to support it, but they would anyway, the legal system has to deal with them.
To say credit card interest is too high is ridiculous, if people can't afford it, don't buy it.
Many generations, over many centuries, managed with that mantra.FFS

 

[Wysiwyg]

This is the whole problem regarding debt, gambling, smoking, drug use, etc.

You can't legislate, to stop people doing, what they want to do.

That's right. People do what they want and that is fine unless their actions infringe on other people like passive smoking or king hits or crashing a vehicle on drugs or fix em up costs paid by taxes.

 

[poverty]

Credit Card debt is one of my favourite things. Citibank will routinely send me cheques for 20K at 0% interest, they do this because they know my ING account is very safe and I will look after their 20k for them until the time comes to pay it back.

 

[Knobby22]

Really? I am sure they have ulterior motives. If only a few of people getting the money blow it then the bank stands to gain greatly.

 

[SmokeyGhost]

I suppose in a broad sense credit card debt or overall personal debt may be an issue but, after quite sometime, I've concluded I can do absolutely zilch about the debt of others so now I only concern myself with managing my commitments to ensure I never over extend myself to the detriment of my family.

I have encountered a number of individuals who have got themselves into a little bit of strife with cc and other forms of debt and while saying in response "Not good. Hope it works out for you," mentally I take the position "You're an adult, you made a choice, so deal with it." Very mean of me and very indifferent to their plight I agree.

 

[pixel]

I suppose in a broad sense credit card debt or overall personal debt may be an issue but, after quite sometime, I've concluded I can do absolutely zilch about the debt of others so now I only concern myself with managing my commitments to ensure I never over extend myself to the detriment of my family.

I have encountered a number of individuals who have got themselves into a little bit of strife with cc and other forms of debt and while saying in response "Not good. Hope it works out for you," mentally I take the position "You're an adult, you made a choice, so deal with it." Very mean of me and very indifferent to their plight I agree.

"You can lead a horse to Uni,
but you cannot make him think."

IMHO there is a difference between "indifference to their plight" and recognition that you can't lead other people's lives for them. If a friend of your falls for the marketing jingle to "keep up with the Joneses" and outspend all neighbours no matter what, your lonely voice of reason will at best annoy them, most likely reduce the number of your friends by one.

Nobody wants to talk about the Elephant in the Room: Big Business and Big Government have been in bed at least since the "Recession We Had to Have". As a consequence, school curricula no longer focus on basic arithmetic that would enable young adults to figure the effects of cc interest and compound interest; even budget discipline has become an outmoded concept that only applies to fuddy-duddy fossils. Instead, kids are taught the importance of feeling good about themselves, looking appealing, and fitting in with their peers and role models - most of whom are making a comfortable living on American-led TV shows and flogging eye liners, fake tan, and stinkums. Each time a kid forks out for the "must-have" rubbish, the cash register rings the bell for the retail store, the government rakes in 10% GST, and the consumer ends up with a fake feel-good and a real debt.
Result: win-win-lose.

 

[SmokeyGhost]

Yeah, you are likely to be right there, pixel.

Like many I assume, I have noticed the increase in advertising of these so-called debt consolidators and lenders offering quick, small loans. More debt trouble ahead I think but I just shrug my shoulders and if individuals sink, then they sink. As long as it's not me.

 

[greggles]

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?

Eleven years later and credit card debt is getting worse. As the cost of living has increased, so has our collective credit card debt. Aussies aren't cutting back, we're cutting loose with the plastic to make ends meet. We now owe over $40 billion just on our credit cards.

But it's not just us. Americans now owe around $1 trillion on their credit cards. I would wager it's a fairly similar situation across most western countries. Stagnant wage growth and rampant inflation are a recipe for more personal debt with credit cards being the most convenient way to access it.

Many years ago I got myself into $8,000 of credit card debt. Took me years to dig myself out of that hole.

What's most concerning is that a recession would put even more pressure on household debt. Combine that with rising unemployment and a stock market correction and we would see a wave of personal insolvencies, which would then impact the property market as more properties hit the market by distressed sellers. In turn this would impact retail and other businesses and we could see a wave of corporate insolvencies as well.

The domino effect that could potentially ripple through the economy could see us in the worst economic position in generations, especially if other countries, in particular the USA, follow suit.

I just had a couple of beers and all this suddenly occurred to me. Beers tend to do that. To sum up, I'm still very bearish. The piper has not yet been paid. More debt is not the answer but it's the most convenient solution for most, even governments.

October is only three and a half months away.