National Credit Crisis Deepens
April 10, 2008
America’s credit woes appear to be escalating, according to figures released about the state of U.S. credit card debt.
Experts now say that such debt has reached $920 billion and appears to be growing. Part of the problem is the housing crisis. It used to be that homeowners took out home equity loans in order to finance emergencies. Now, given stricter loan standards, homeowners are instead turning to credit cards to get them through the tough times.
At this point, fortunately, delinquency rates for credit cards continue to be low. However, they do appear to be on the rise. Credit card customers appear to be paying less money on their credit cards each month, resulting in higher debt carryovers. A growing number of consumers are also taking out cash advances on their cards, resulting in additional fees and higher interest rates.
Because of losses derived from the subprime mortgage crisis, some lenders are hiking their credit card interest rates. They’re also enforcing tougher repayment conditions in an effort to win more financial concessions from consumers.
Consumers are also facing higher energy costs, which can place additional strain on family budgets. When forced to pay more in gasoline costs, consumers may find it increasingly difficult to come out ahead. The problem could be exacerbated by the holiday shopping season, as consumers go over their budgets in an effort to buy some Christmas cheer.
At the same time, a number of credit card companies are experiencing problems of their own. For instance, Bank of America, Citigroup, and American Express are reporting some of their worst financial figures since the year 2001.
Still, the credit crisis does not appear to be nearly as traumatic as the nation’s housing crisis. As many as two million homeowners may face foreclosures over the next year—a situation that has prompted calls for a Congressional bailout. The housing market is not expected to rebound until the summer of 2008.
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