US Consumer Credit Increases Yet Again

Originally posted in our forum and moved here:

Forget about the fact you can’t afford the new car or couch, that hasn’t stopped Americans from spending way more than they earn. US consumer credit rose by a bigger-than-expected $10.27 billion in June on a surge in credit card debt, said a Federal Reserve Report.

Consumer credit outstanding rose to $2.186 trillion in June, rising at a 5.66 percent annual rate from $2.176 trillion the prior month. Revolving credit, which includes credit and charge cards, rose by an annual 9.80 percent rate in June to $820.65 billion after a 11.04 percent surge a month earlier.

Non-revolving credit — closed-end loans for cars, boats, education expenses and holidays — rose 3.19 percent to $1.366 trillion in June after slipping 1.35 percent the prior month.

This just in, take control of your finances and stop using bad credit to your spending splurges, it will help you in the long run!

User MarkTwain replied:

bad news, such an amount of unsecured debt,

i had to do a load of research on credit cards for the marketing consultants i freelance for (the client was one of the major payment system providers, cant tell you which, confidentiality agreements etc)

the u.s. and the u.k. are big into credit cards (when i did the research in 2005 the uk had the highest per captia credit card ownership in the world)

there is a frontline documentary on the subject that may interest some here…

“secret history of the credit card”

http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

it tells the story of how the credit card industry innovated new products and avoided legislation etc. (these innovations were not in the public interest shall we say)

add into this the fact that the US changed its personal insolvency law (making it tougher to do) and the UK is looking into this too. (under pressure from the credit industry to protect their investments better perhaps?)

I had to read through the small print for over 100 credit card and store card products and analyse the marketing, it was boring, but i learned stuff about the nature of the UK market. (and i think the u.s. is pretty similar, basically the product innovations in the u.s. came over to the uk at some point in the 90s, some big players like MBNA being important in exporting their products, and GE finance in the UK store card market)

i used game theory in a basic way to define consumer types, strategic revolvers, strategic deadbeats, loyal revolvers and loyal deadbeats. (viewing consumers as players in a game proved useful in analytical terms) (i can explain what these consumer types are if anyone is interested)

i concluded that the industry was walking a fine line (in the UK at least, that was my remit), if it continues to push it with these misleading products and perplexing small print and we hit a recession or credit crunch legislation may follow. (like after the early seventies secondary banking crisis in the uk, following it was the 1973 credit consumer act, the uk is putting through a new act/bill at the moment to try and deal with the changes in the industry, im not sure of a time line on this but it was in the house of lords when i did the research last year, how restrictive it will be remains to be seen, but if we hit a recession and credit cards take some of the blame for the publics overborrowing then further legislation may result, credit industry beware!!.)

on a macro economic point, what do people think about the source of this easy money?, is chinese investment/saving a big issue here? (if it is what will happen to credit in the uk/usa if the chinese economy slows down or hits crisis?)

and do people think this is just part of a cycle, high liquidity to low liquidity and back again? (cheap vs expensive money) if so how deliberate is this? (who gains when banks forclose on debtors and we change from easy money to hard money, if you see what i mean)

these are some of the economic areas i need to fill in for my own information. (I was coming to credit card industry as a PR/Marketing “man”)

Mod Replied:

I say make these people pay it all back, if you borrow up to your nose then part of it is the banks fault for lending to an idiot. If you’ve defaulted cause you’re crooked, then bankruptcy shouldn’t save you… no clean slate but responsibilities to pay back your debtors…….

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