US Consumer Debt growing

Welcome to the Precious Metals Bug Forums

Welcome to the PMBug forums - a watering hole for folks interested in gold, silver, precious metals, sound money, investing, market and economic news, central bank monetary policies, politics and more. You can visit the forum page to see the list of forum nodes (categories/rooms) for topics.

Please have a look around and if you like what you see, please consider registering an account and joining the discussions. When you register an account and log in, you may enjoy additional benefits including no ads, market data/charts, access to trade/barter with the community and much more. Registering an account is free - you have nothing to lose!

I owe nobody nuffin.

It's interesting: We hear stories like the above, and most of the high-level debt slaves pooh-pooh it off. Yah, yah, my interest is only $XX.xx a month, yada yada.

But...four years ago I foolishly took a bath (I shouldn't say "invested") in an RV rig. I tried to use logic - a pickup truck (market-desirable) and a trailer (tried to pick one that holds its value better). I bought, and rather than cash in PMs, I borrowed. They make it easy. Oh, lordy, they make it easy. The payment was well within my means; but I'd have had it until long after I die. Over ten years, at 4 percent (then).

Well, the story's been told. Vaxxident, far from home - head-on, other driver dead. Maybe dead before impact. All equipment involved, totaled out. Amazingly, all I got out of it was whiplash - and the incredible hassle of getting home with a lot of expensive camping-trip gear. I made it.

Insurance paid it off, after a little more hassle than I expected. All's well that ends well - for me, at least.

But, now. My monthly costs are rent and electric. And, even though I'm below the poverty line in income...I have PLENTY more money coming in than I'm spending. Just a week ago, getting nervous about my high bank balance (over $6k) I went and bought more krugerrands.

The little savings add up, fer sure. And the peace of mind of not having to worry about unseen expenses, is a joy beyond price.
I keep a credit card for emergencies and always keep it paid off. Most months, I don't even get a bill in the mail because there is no balance.

Us cards (2) for all purchases so I can get points that convert to $$$. When the points reach money stage the cash is deposited to an account that pays interest.

Cards paid off monthly (on line - no checks.)

Owe nothing. Everything paid off. It's a nice feeling to be debt free.
Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.

Debt that has transitioned into "serious delinquency," or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported. The quarterly increase at an annualized pace was around 8.5%, New York Fed researchers said.

Delinquencies also rose in mortgages, auto loans and the "other" category. Student loan delinquencies moved lower as did home equity lines of credit. Overall, 1.42% of debt was 90 days or more past due, up from just over 1% at the end of 2022.
While the rise in delinquencies happening from low levels, the trend "bears watching because it is happening while the economy is still growing," said Joseph LaVorgna, chief economist at SMBC Nikko Securities.

"What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch," LaVorgna said in a note. "In other words, a mild downturn could turn into a deep one."


"Garbage Deals": Dealership Puts Customers In Cars With $3,000 Monthly Payments​

A New York Fed survey published earlier this week indicated that, in the fourth quarter of 2023, auto loan delinquencies reached levels not seen since right after the Great Recession more than a decade ago.

As a refresher, the data from Tuesday by the Federal Reserve Bank of New York showed (read: ZH report here) the rate at which car owners are behind on their payments hit an annualized rate of 7.7%, the highest level since 2010.

"Delinquency transition rates have pushed past pre-pandemic levels, and the worsening appears to be broad-based," researchers at the NY Fed wrote in a blog post.


The Meek won't inherit the Earf.

The Stupid will get it.

And this is what they do.

Judas Priest...who the hell needs an expensive car (truck, most cases) when the whole nation is melting down with a Camp-Of-The-Saints collapse? It's not WORTH it. Get something (relatively) cheap and old and overlooked by arse-wholes who'll happily chuck rocks at anything looking valuable.

Water finds its own level, and that aquifer is a low one.
Tangentially related to the thread:
Capital One Financial Corp. is exploring a potential acquisition of credit-card lender Discover Financial Services in a major move that would rank as its largest-ever deal, people with knowledge of the matter said.

McLean, Virginia-based Capital One is working with advisers and has been holding talks with Discover about a deal, the people said, asking not to be identified because the information is private. If it's able to reach an agreement, an announcement may come as soon as this week, according to the people.

Looks like Capital One is going to acquire Discover. Reports are that the deal is done. "Great" news because...

The CFPB on Friday released a survey of 84 banks and 72 credit unions that found large credit card issuers offered the highest interest rates across all credit scores. ...
The median interest rate charged by large credit card companies was 28.2% compared with 18.15% charged by small issuers, to consumers with good credit — typically credit scores between 620 and 719, the CFPB said.

It's obviously not for the heavy consumer debt. Used to be, a business in debt beyond its MarketCap was a "zombie" corporation. Well, the plastic debt-slaves are now zombies.

I'd wager they're buying the whole of the purchase and credit history of the Discover customers.

Not that it will do any good, once the full collapse hits...

Capital One's $35 billion Discover deal hinges on playing consumer champion​

Feb 21 (Reuters) - Capital One's (COF.N), opens new tab chances of getting its $35.3 billion deal for Discover Financial (DFS.N), opens new tab past regulators hinge on the bank showing it can disrupt the close-knit U.S. credit card industry, five experts in corporate law interviewed by Reuters said.

Investors are assigning only a 50% chance to the deal being completed amid concerns the proposed acquisition could become a lightning rod for U.S. regulators and lawmakers fretting over high credit card interest rates and fees.

To boost its chances of getting the deal approved, Capital One will have to show it will share some of the deal's $2.7 billion in projected pre-tax cost-savings with consumers, the people said.

"At the end of the day, the current regime of regulators wants to know if, and how, this merger will benefit consumers," said Abiel Garcia, a former deputy attorney general for the California Department of Justice who is now an antitrust lawyer with Kesselman, Brantly & Stockinger.


... More than one-third of U.S. households (36%) say they are carrying more credit-card debt month to month than they have in emergency savings funds, according to a new survey by Bankrate. That’s the highest percentage since polling began in 2011.

That was more likely to be the case for Gen X and millennial consumers, the survey found. Meanwhile, baby boomers were more likely to say their emergency savings exceeds their credit-card debt.

“The 60% of U.S. households living paycheck to paycheck are really feeling it, and necessities rather than discretionary items are increasingly being put on credit cards,” Greg McBride, chief financial analyst at Bankrate, told MarketWatch. Because credit-card interest rates have climbed to 20% or higher, the fact that more consumers are using them to finance purchases “is a clear sign of financial strain,” he added.
“Credit-card balances are rising and so are delinquencies. This indicates elevated financial stress on consumers,” said Amy Crews Cutts, senior economist for financial services company Primerica PRI, +0.35%. Like McBride, she also blames “the high cost of just getting by” rather than overspending.

Just 3% of middle-income households (incomes between $30,000 and $130,000) surveyed by Primerica said their incomes have gone up faster than the cost of living, despite slowing inflation and rising incomes. The firm estimates that over the two and a half years from May 2021 to October 2023, middle-income households on average spent $2,445 more than the rise in incomes on necessity items alone (food, gas, utilities and healthcare, excluding insurance).

By some measures, credit cards have never been this expensive. For cardholders who carry a balance without paying it off in full each month, issuers generally charge interest based on annual percentage rates (APRs). In 2022 alone, major credit card companies charged over $105 billion in interest, the primary cost of credit cards to consumers. While the effects of increases to the target federal funds rate have received considerable attention, the average APR margin (the difference between the average APR and the prime rate) has reached an all-time high.

In this analysis, we show that higher APR margin drove about half of the increase in credit card rates over the last decade. In 2023, excess APR margin may have cost the average cardholder over $250. Major credit card companies earned an estimated $25 billion in additional interest revenue by raising APR margin. Increases to the average APR margin - despite lower charge-off rates and a relatively stable share of subprime borrowers - have fueled issuers’ profitability for the past decade. Higher APR margins have allowed credit card companies to generate returns that are significantly higher than other bank activities.

Credit card average APR margin is the highest on record.

Over the last 10 years, average APR on credit cards assessed interest have almost doubled from 12.9 percent in late 2013 to 22.8 percent in 2023 — the highest level recorded since the Federal Reserve began collecting this data in 1994. The APR on most credit card accounts can be viewed as being composed of the prime rate and the APR margin. The prime rate (a benchmark most banks use to set rates) represents a good proxy for banks’ funding costs, which have increased in recent years. But credit card issuers have also sharply increased average APRs beyond changes in the prime rate.

Nearly half of the increase in average APR over the last 10 years has been driven by issuers raising their APR margin. APR margin for revolving accounts is now at 14.3 percent, the highest point in recent history. ...

Top Bottom