Credit Card Debt Rises

After seeing declines in the balances held by consumers in 2009 and 2010, credit card companies have been seeing increased balances in 2011. The increases are well above 2010 levels and are expected to continue to rise. Thanks to the CARD Act legislation being fully enacted, credit card companies have a very sound idea of what the rules are for lending, and what they will be for the next few years.

The holiday season coming will likely lead to increased spending from consumers, helping the economy move slowly towards a recovery. It also will add to the outstanding debt balance that lenders are carrying.

Credit card lenders have been more willing to lend to consumers and have eased standards. Following the 2008 recession, along with the CARD Act passing, credit card lenders tightened their lending standards. Since then, standards have eased a bit with consumers using their cards more in the past quarter. The balance of outstanding credit card debt rose $18 billion during the past quarter.

Some analysts believe that this increase of debt is a bad sign, as the people spending are on shakier financial ground today than they were three years ago. The people have fewer assets and more uncertainty about employment and spending. These analysts expect to see defaults on credit card debt rising again following the first quarter of 2012.

Already, the lenders are saying their new approach is working, as the majority of card holders are carrying smaller balances than in 2008, making more payments on time, and are being more responsible with their credit cards. The analysts think this is a result of the stricter lending, and the new release of credit to lower credit scores will begin showing following the annual spending and repayment seasons.

Analysts also fear that new people being issued credit cards will become over-leveraged with debt, driving default rates back up. There isn't enough data on new users to prove either side correct.

 

Latest News:
Federal Student Loan Reform
Consumer Credit Card Balances Drop for Second Month In A Row
Consumer Fraud Lawsuit Filed Against Debt Settlement Company CSA Credit Solutions