No. of Recommendations: 1
I think maybe some are missing Otter's point. Although the article highlights credit card debt, it is mainly about consumer debt. The FDIC defines consumer debt as anything other than a mortgage. Cars, boats, RV's, furniture bought on 90-days-same-as-cash, etc. are all considered consumer debt. It is obvious that this type of spending is on the increase. How many of us know someone that is paying two car leases, a boat payment (boats can be financed for up to 10 years now), and live in a home that would have been considered a mansion by their grandparents' standard?
Not only are people financing everything, but with easily available credit, they are financing nicer (more expensive) things. For another $50 a month we can move up to the XLE. With no payments until June, 2002, you can get that new sofa AND the entertainment center.
One thing that the numbers don't show is how much of this consumer debt has been eliminated by switching it over to a home equity loan. It's still there and will still have to be paid for someday only now people are putting up their homes as collateral for last year's vacation (and paying for it for 30 years).
The number of bankruptcies is increasing every year and will probably continue on this track. Although it is ultimately the responsibility of the consumer, it is difficult to feel sorry for the banks and finance companies that kept extending credit to persons that had abused that which they already had.
I really do believe that this situation is going to get a lot worse before it gets better. How bad---I don't know. It will surely hurt the earnings of banks, credit unions, and other financial institutions. Perhaps the worst part is that all consumers will be paying for this for a long time.
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