Tapped Dry? CC Balances Soar $32Bln in 10 Weeks

Posted by urbandigs

Mon Nov 3rd, 2008 02:43 PM

A: You know how I discussed the 'completely tapped out consumer' on this site earlier in the year? Well, did you also know that in the past 10 weeks, outstanding credit card balances soared $7.1Bln in the week ending October 15th, representing a +1.9% single-week rate of expansion ... or ... nearly ONE-HUNDRED PERCENT annualized (+98.4%)? That's how you know consumers are tapped dry, resorting to their credit cards to help pay for their living expenses! You know it wasn't going to discretionary items! Worst of all, the fed just reported that both credit card limits & demand are contracting fast; not the best combination!

The federal reserve estimates that this country has an outstanding unpaid balance totaling approximately $850,000,000,000 in credit card loans. We are very rapidly approaching a trillion! The subprime market was about a trillion or so wasn't it?

What's most disturbing is the pace at which credit card balances soared in the past 4 weeks, just as the fierce stock market selloff got going. Here are the details via Clusterstock.com:

  • Credit Card Loans, 10 months Sep-07-thru-Jul-08 ... UP $29.1 billion


  • Credit Card Loans, 10 weeks Aug-08-thru-Oct-08 ... UP $32.3 billion


    • "In other words, Commercial Bank 'exposure' via the total amount of Credit Card 'loans' outstanding has risen MORE in the last ten WEEKS, than it did in the previous ten MONTHS COMBINED !!!
    Telling isn't it. One thing is for sure, most Americans can no longer count on their homes for mortgage equity withdrawal! You want to know how dead the non-prime mortgage backed securities industry is right now, check this out!

    "Non-Prime MBS Issuance Hits Record Low in Third Quarter of 2008: Zero" (via Infectious Greed)
    There was no issuance of subprime, Alt A or “other” non-prime mortgage backed securities in the third quarter of 2008, the first blank quarter since the creation of the non-prime MBS market, according to the Inside Mortgage Finance MBS Database.
    Back to credit lines for a moment, the fed just released data stating (via Bloomberg):

  • 95 percent of U.S. banks raised the costs on credit lines to large firms, and "nearly all banks" increased the spread on borrowing rates over the cost of funds on loans to large and mid-sized firms versus July

  • Nearly 60 percent of respondents indicated that they had tightened lending standards on credit card loans, while nearly 65 percent of respondents indicated that they had tightened lending standards on other consumer loans

  • About 85 percent of domestic banks tightened lending standards on commercial and industrial loans to large and mid- size firms, the highest since the survey began in its current format in 1991

    The lone bright spot:

  • About 70 percent of U.S. banks indicated they tightened standards on prime mortgage loans, down from 75 percent in the previous survey in July


    • The debt party is over. Hopefully you have managed your debt wisely, and lived within in your means. There was a time I did not, and I paid for it. Luckily, it was a learning experience. You wouldn't think it was that easy to save a few hundred bucks a month from sacrificed luxuries, and put it towards your credit card debt. It is. Start by paying off the lowest balance first, get it to zero, and than work on the bigger ones. If possible, try to rollover super high rate balances to a new card that is offering a 12-month 0% balance transfer incentive. That will help a bit too. Outside of this, it's up to readers to provide more CC debt paying tips!

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