Credit card commercials glamorize going into debt

You don't have to be an economist to despair over the financial news we read these days. Recent business headlines have included the following: ''What to do if you can't pay mortgage on time,'' ''Housing downturn could lead to deep recession,'' and my favorite, ''Revised savings rate still nothing to brag about.''

That last story revealed that the annual rate of savings among Americans in 2006 was -- are you ready for this -- .04 percent. Translated into cash, that means we saved about half a cent for every dollar we earned. I'll grant you that times are tough but half a cent? At that rate, a household earning $50,000 a year would sock away a grand total of $20 a year. Don't spend it all in one place.

We are all saving significantly less money these days. Twenty-five years ago the savings rate in this country was about 11 percent, or 11 cents for every dollar we earned, 275 times as much as we save today. At that rate, our $50,000-a-year household tucked away $5,500 a year; or about $450 a month.

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Late payments on credit cards decline

WASHINGTON — Late payments on credit card bills dipped in the second quarter, while delinquencies on home-equity lines of credit climbed to a 51/2-year high, painting a mixed picture of how people are managing their debt.

The American Bankers Association, in its quarterly survey of consumer loans, reported Wednesday that late payments on credit card bills dropped to 4.39 percent in the April-to-June quarter.

That was down from 4.41 percent in the first quarter and was the lowest reading since the final quarter of 2005.

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Mortgage lending increases as credit card spending declines

While mortgage lending continued to grow in August, credit card borrowing continued to fall back in the month, a new report shows.

Data released by the British Bankers' Association (BBA) indicated that mortgage lending rose by an underlying £6.1 billion over the month.

This was above the previous month's increase of £5.8 billion and the recent monthly average of just £5.4 billion.

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Why are credit card rates still out of control?

It has been more than six months since Congress began looking into what Sen. Carl Levin (D-Mich.) called the “unfair or abusive” practices of the credit card industry.

In March, bank executives were called to testify before the Senate Permanent Subcommittee on Investigations. So much public attention was focused on the issue at that time that several big banks announced they would modify or eliminate a few of their most egregious practices. Committee members vowed to write legislation to protect American consumers.

So far Congress has done nothing to reduce or limit the exorbitant fees and sky-high penalty interest rates being charged to cardholders. And consumers are about to take it on the chin yet again.

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Next big crisis will be credit card debt

With the mortgage crisis still with us, the next big mess is coming. It is the other shoe dropping -- the credit card mess -- and it will be a big shoe.

American credit card debt is $850 billion, twice as much as the debt of the world's 54 poorest counties. The average household carries $9,659 of credit card debt.

Those who pay off their bill every month are known as "deadbeats," as they pay no interest, which is about 14 percent APR.

Last year, credit card companies mailed out 8 billion card offers and the average card holder has seven credit cards. Americans charged $51 billion of fast food.

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Credit card rates rising, limits dropping

Now that homeowners can no longer easily use their homes as an ATM, many are turning back to credit cards.

But beware. Card issuers, like other lenders, are sensitive to problems in the beleaguered mortgage market and unlikely to give much leeway to consumers who start appearing risky. You may find your interest rate rising or your credit limit reduced.

"They are very, very sensitive to anyone who slips up on their payments, even just a little bit late," said Mark Zandi, chief economist at Moody's Economy.com.

Some consumer advocates say they have been hearing more complaints about higher interest rates and reduced credit limits when customers were late with a single payment or took on more debt.

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China's credit card market enjoys huge potential

"It's just a beginning. I think there's a huge potential going forward." That's how a senior management with American Express describes the credit card market in China.

The world's largest independent credit card issuer has recently cooperated with China CITIC Bank. They together launched their first card product in Beijing on Monday.

China's central bank unveils that the number of credit cards issued in the country has been increasing at an average growth rate of 1 million per month in the first quarter of this year.

Based on a record of nearly 50 million by the end of last year, this growing pace, however, doesn't surprise Dave Keung, the vice president of American Express Greater China.

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Credit card purchases rising

WASHINGTON - Consumers kept charging at a rapid pace on their credit cards in July although their overall borrowing slowed a bit.

The Federal Reserve reported that consumer credit rose at an annual rate of 3.7 percent in July, down from a 5.9 percent growth rate for consumer debt in June.

The slowdown reflected a big drop in borrowing in the category that includes auto loans. The category that includes credit cards saw an increase as consumers continued to turn to their credit cards to finance purchases now that home equity lines of credit are becoming harder to obtain.

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Crunch may hit consumer

The turmoil that started in the mortgage market and ripped through other credit markets has not impacted credit card, auto and other consumer loans in a big way.

Some experts fear that it might, though, especially if the economy weakens.

Soaring delinquency rates on subprime mortgages have caused investors to turn their backs on securities backed by risky home loans. As a result, many lenders have cut back or stopped making mortgages other than conforming loans that can be sold to Fannie Mae and Freddie Mac. That means borrowers have to pay more for non-conforming loans - including jumbo loans over $417,000 - than they did a few months ago, if they can get them at all.

Many credit card, auto and college loans are also packaged into asset-backed securities that are sold to investors. Demand for these securities has also declined in the aftermath of the credit crisis. "A number of securitization deals have been delayed or shelved," mainly because the loan originators and investors couldn't agree on a price, says Tom Deutsch, associate director of the American Securitization Forum.

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Confessions of a Credit-Card Pusher

It all started as a way to make some quick cash. In 2002, at the beginning of his freshman year at the University of Pittsburgh, Ryan Rhoades needed some extra spending money.

So when his friend told him about an Internet ad offering Pitt students a way to make some cash in a couple of hours, he didn't hesitate. Rhoades rounded up some of his buddies and headed over to the designated classroom at the student union.

What he saw in that room offers a view of how creative credit-card companies have become in marketing their services to college students.

An enthusiastic man who identified himself as a representative of Citibank (C) welcomed them and said they had the opportunity to make some money by signing up their fellow students for credit cards. The bounty for each completed application would be $5 to $10, depending on the kind of card.

In retrospect, Rhoades feels like he and his fellow students were being recruited to become credit-card pushers. "That's exactly what it was," he says.

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Credit card companies woo struggling mortgage-holders

As subprime borrowers began to default on their mortgages in rapidly growing numbers this year, credit card issuers increased their efforts to sign up such customers with tarnished financial histories, according to a market research firm.

Direct mail credit card offers to subprime customers in the United States jumped 41 percent in the first half of this year, compared with the first half in 2006, according to Mintel International Group. Direct mail offers targeted at customers with the best credit fell more than 13 percent.

Yet, during this same period, defaults on subprime mortgages, which charge higher interest rates because the borrowers' blemished credit makes them bigger risks, rose significantly. In June, nearly 1 in 5 subprime mortgages were at least 60 days past due, and more than 1 in 20 were in foreclo sure, according to First American LoanPerformance, a San Francisco firm that collects and analyzes mortgage data.

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Credit-card firms see defaults soar

NEW YORK -- With more Americans filing for bankruptcy again after last year's hiatus, credit card default rates are spiking.

Though the percentage of payments being written off as uncollectable isn't as high as it was a couple years ago, the conditions are ripe for it to catch up. Bankruptcy filings keep pouring in, home prices continue to fall and energy prices remain high.

According to data from Moody's Investors Service, credit card companies wrote off 4.58 percent of payments between January and May, up nearly 30 percent from the same period in 2006.

"In 2007, we expected an increase, as bankruptcy filings returned to more normal levels," said Jay Eisbruck, managing director in Moody's Investors Service Asset-Backed Finance Group. He called this year's resurgence in bankruptcy filings the primary reason credit card default rates have soared.

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Is next big credit crunch in the cards?

Now that the easy money in home mortgages is all but over, consumers may soon be caught in a financial squeeze with their credit cards.

That’s the worry among some economists and credit counselors as home lending has shifted abruptly into low gear this summer. That leaves homeowners owing big sums to Visa or MasterCard without an important escape hatch — the ability to pay down the plastic by dashing off a check from their home equity line of credit or rolling the debt into a new, bigger mortgage.

“You’re not going to be able to get that mortgage loan. You’ll be stuck with the higher-interest credit card debt,’’ warns Carl Steidtmann, chief economist with Deloitte Research. “We will have to live within our means. I know it’s a troubling phenomenon. But we’re not going to be able to spend at levels well above our income levels.’’

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