Should we be worried about the credit card debt clock?

[frugal.rock]

You love your doom and gloom stuff @greggles
I'll bite, what's the relevance of October?

Beer goggles ahoy.

 

[frugal.rock]

The debt was nearly $50billion, less than 12months ago people are paying debt down quicker than ever before.

That was March 2012 thanks Trawler.

We now owe over $40 billion just on our credit cards.

Seems like we going backwards to me...

 

[greggles]

You love your doom and gloom stuff @greggles
I'll bite, what's the relevance of October?

Beer goggles ahoy.

October 1929 and 1987. Beer googles = crystal ball. The chickens have still not come home to roost.

Think I'll go and watch some Robert Kiyoskai and Harry Dent YouTube videos.

 

[Value Collector]

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.

Credit card debt today is only about what it was in 2010, and we have had some population growth and wages growth since then, so we aren’t in to bad a shape.

 

[farmerge]

Credit card debt today is only about what it was in 2010, and we have had some population growth and wages growth since then, so we aren’t in to bad a shape.

Any credit card debt is not healthy. But for us it is what gives us the free dollars every time we amass the required number of points, only because we always pay on time.

 

[Value Collector]

Any credit card debt is not healthy. But for us it is what gives us the free dollars every time we amass the required number of points, only because we always pay on time.

I use credit cards for the convenience and the points, but obviously don’t pay interest.

From a personal finance stand point it’s not great to pay credit card interest, but it’s not a terrible thing from a national standpoint if a certain amount of credit card is debt exists.

Also, when it’s reports that say $50 Billion of credit card debt exists, that includes all the amounts that will be paid off at the end of the month that doesn’t carry interest.

 

[Belli]

Any credit card debt is not healthy. But for us it is what gives us the free dollars every time we amass the required number of points, only because we always pay on time.

I don't have a credit card; debit card only. All transactions are with the cash at bank. Not sufficient cash I simply don't buy but I've not been in that situation so far.

 

[Value Collector]

I don't have a credit card; debit card only. All transactions are with the cash at bank. Not sufficient cash I simply don't buy but I've not been in that situation so far.

That’s a perfectly valid strategy, especially for people that might be tempted to over extend themselves.

However, credit cards can be cheaper and have more benefits.

For example as a frequent traveler, my credit card gives me thousands of dollars of value in the form of free travel insurance and free international transactions.

There is also the benefit of having my money sit earning interest for me against me for longer until the credit card statement is due, rather than being deducted on the day of purchase.

Credit cards also seem to have greater consumer protections.

The biggest risk with credit cards is the chance an undisciplined person will over extend themselves, so it’s a personal choice.

 

[farmerge]

I don't have a credit card; debit card only. All transactions are with the cash at bank. Not sufficient cash I simply don't buy but I've not been in that situation so far.

Good stuff Belli. The banks don't like us non-debtors can't make any money out of us.

 

[farmerge]

That’s a perfectly valid strategy, especially for people that might be tempted to over extend themselves.

However, credit cards can be cheaper and have more benefits.

For example as a frequent traveler, my credit card gives me thousands of dollars of value in the form of free travel insurance and free international transactions.

There is also the benefit of having my money sit earning interest for me against me for longer until the credit card statement is due, rather than being deducted on the day of purchase.

Credit cards also seem to have greater consumer protections.

The biggest risk with credit cards is the chance an undisciplined person will over extend themselves, so it’s a personal choice.

Mr Value on the same page as you on this.

 

[Belli]

Good stuff Belli. The banks don't like us non-debtors can't make any money out of us.

It's a debit card not associated with my main accounts. It never has much in the way of funds on it so when I need to buy a high value item, I transfer the relevant amount to the card. I like to think I have a strong financial discipline when it comes to spending money. I don't need much anyway given my relatively simple life-style (preference for going to one of the nature parks rather than a cafe to pay $30 for a not-so-good breakfast.)

 

[Knobby22]

I find the name of this thread funny.
Why should I care about a clock?
(Been down the pub).

 

[frugal.rock]

How about "debt Glock".

You don't wanna owe the man...

 

[greggles]

From the first link in my post from 16 June:

Annual spending on credit cards is almost 20 per cent higher than at the same time last year as households resort to short-term borrowing to make ends meet amid Australia’s cost of living crunch.

Just over $394 billion was spent on credit cards in the year to April, an increase of $62 billion compared with the year to April 2022, the latest Reserve Bank figures show.

While credit card debt has fluctuated over the years, the trend in the last 12 months is up. With the cost of living on the increase, will those on fixed or lower incomes turn to credit to make ends meet?

 

[divs4ever]

remember one man's debt is another's asset in this modern world

going to be messy if this all unravels