Credit Cards » Credit Card News » As School Year Start, Student Credit Card Worry Begins
Date July 3, 2009

As School Year Start, Student Credit Card Worry Begins

Parents are once again coming around to that time of the year when they send their children of to college to hopefully earn their degrees and move on to a good life. Unfortunately, a lot of bad things can happen when their kids are in college and, if statistics from Sallie Mae are to be believed, one of the worst is credit card debt.

As School Year Start, Student Credit Card Worry BeginsCredit cards and students are definitely a bad mix. The problem is quite widespread and well known. Unfortunately, the problem had enough time to grow and get big enough so that some students graduating from college this year will be several years away from paying off all their credit card debts. That is a very serious financial situation to be in, considering that these students are just starting off professionally.

A recent study from Sallie Mae show that the graduating students of last year carried an average of $4,100 in debt. That’s up by $1,200 from 2004’s average of $2,900. It gets worse. According to the statistics, one in five college seniors have a credit card balance higher than $7,000. Also, 62% of them have more than four credit cards at a time. The situation is an alarming one, considering that a majority of college students don’t have any reliable employment and that their credit card payments largely depend on the money that their parents are giving them. What is even more troubling is that many college students are not very well equipped to handle the responsibilities of carrying credit card debt.

The new credit card bill that President signed last May will mean more protection for credit card holders and, in fact one of the primary targets for protection in the bill are students.
There have been many complaints against credit card companies offering easy-to-get credit cards to students. Because students are seen as big spenders, credit card companies see them as golden earning opportunities. Unfortunately, in the end it is the parents who will have to shoulder the burden of paying off those spendings. Another option is to go into debt. Alarmingly, most college student are not very worried about debt and consider it as a normal part of their lives. This kind of thinking is very dangerous, especially when the people who are carrying them are the future generations of the country.

For most consumer advocates -and parents, the credit card bill is a big step forward. Although credit card companies are going to be complaining about it – and some students as well, the legislation in the bill will help young Americans avoid the dangers of getting into large debts and losing several years of monthly income to paying it off.

Date June 18, 2009

Credit Card Companies Opting For Quick Fixes

As the economic recession continues, credit cardholders are getting weighed down by credit card debt more and more. Rising interest rates and fees threaten to make it heavier still. However, a curious budding practice among credit card companies may be the answer to credit cardholders’ problems.

1194188_31355691While credit cardholders are worrying about their individual credit card debts, credit card companies are also in dire straits financially themselves. In March, revolving credit was recorded at a total amount of $939.6 billion. Revolving credit is often used as a measure of credit card debt as it is a close approximation of the debt value. According to the Federal Reserve, during the first quarter of the year, the total credit card debts that credit companies had, 6.5% were debts that were 30 days overdue, at least. The Federal Reserve first began following this particular data in 1991 and, since that time, the value from the first quarter was the highest that they ever encountered. The write offs that credit card companies were also at a peak.

With the passage of a few months, the numbers have hardly gotten better which has credit card companies worried. Furthermore, regulations dictate that a credit card balance that has been six months delinquent will have its value reduced to zero in the credit card company’s books. The thinking is that if the borrower is unable to pay up to that point, the probabilities are that the debt will never be repaid.

Faced with high toxic assets and losing the entire debt to a write off, credit card companies are doing the unexpected, they are accepting debt payments 50% or lower than the original debt to have the debt forgiven.

According to Credit.com founder Adam K. Levin, creditors are willing accept a small percentage of the debt payment rather than get nothing in the end. Thus, credit cardholders with large debts that cannot pay their debts completely have the opportunity to offer their credit company payment which is only a percentage of the original debt in order to have their debts completely removed.

The situation is such that credit cardholders who call up their creditors can have these kinds of offered accepted directly by the customer support person they are talking to without consultation of their supervisors. In fact, some credit card companies are actually doing the calling themselves and offering similar deals to people with unpaid debts.

The trade off of this seemingly fantastic kind of deal is that the credit cardholders’ credit records will have a large black mark on it. Still, compared to the prospect of carrying heavy debt indefinitely, the trade off seems worth it.

Date June 14, 2009

Credit On The Decline As Economic Crisis Continue

With employment problems and a struggling economy to deal with, more and more American consumers are seeing their credit cards as their last life line. Unfortunately, as credit debt problems continue and credit companies try to secure their future profitability when the credit card bill comes into play, credit is drying up at an alarming rate.

Credit On The Decline As Economic Crisis ContinueEquifax, a company specializing on providing credit data to credit companies and similar companies recently released data showing that access to credit cards have considerably diminished. Charge limits for existing credit cards have lowered significantly as well.

According to Equifax’s data, the number of credit card accounts in the U.S. was 365 million accounts for last month. In comparison, the number of accounts in June last year was at 440 million accounts. Credit card companies have also drastically reduced the available credit, withdrawing more than $600 billion in available credit during the past year alone. In May, the available credit stood at less than $3 trillion.

While diminishing available credit, credit card companies are also lowering their risks on existing credit cards. Credit card balance limits are being lowered and balance chasing is beginning to be a real problem for credit cardholders.  Credit card companies are also applying stricter rules on who can avail of credit cards.

Credit card companies are hoping that, by limiting available credit, they can minimize their exposure to risk and recover from the damage caused by the increasing number of delinquencies and defaults. However, judging by the numbers provided by Equifax, delinquencies still continue to rise. Last month, the figures for delinquencies in the U.S. were at 4.79%. Delinquencies have been on a steady rise for the past four years. Compared to figures from 2005, the delinquency rate has almost doubled.

As this continues, consumers are losing out on what is possibly their last financial lifeline, their credit cards. Even more worrying is that when the credit card bill becomes active after a few months, credit is going to be even more difficult to get.

Dann Adams of Equifax stated, “The last lifeline for many consumers is their credit card, and that lifeline is getting shorter”.

Still, there may be some respite from the continuing credit crisis. According to Equifax’s figures, while the delinquency continue to rise, the pace has slowed somewhat. Adams said that mortgage delinquencies may be on the verge of peaking.

“We’re hopeful we’ve seen the bottom and are setting the stage for a recovery”, Adams said. “You don’t see it in the numbers quite yet”, he added however.