
Credit-Card Debt Nears $1 Trillion as Banks Push Plastic - prostoalex
http://www.wsj.com/articles/balance-due-credit-card-debt-nears-1-trillion-as-banks-push-plastic-1463736600
======
throwawaykeno
One thing that's unclear for the article: does this include debt that never
incurs any interest?

I typically have an outstanding balance in the 3-4 figures on my credit card
because I pay for rent, gas, and airline tickets with credit. However, it gets
paid off every month. I guess that's _technically_ debt, but it's not
problematic or anything...

I feel like the majority of credit card debt is the type of "debt" that I
incur every month.

~~~
abarringer
Your feelings are way off. Most credit card debt is not paid off every month.
Not by a very very long shot.

Average credit card debt per U.S. adult, excluding zero-balance cards and
store cards: $5,232.43

Average debt per credit card that usually carries a balance: $7,494.44

Average number of cards held by cardholders - bankcards: 2.24

Average debt per credit card that doesn't usually carry a balance: $1,128.44

[http://www.creditcards.com/credit-card-news/credit-card-
indu...](http://www.creditcards.com/credit-card-news/credit-card-industry-
facts-personal-debt-statistics-1276.php)

~~~
throwawaykeno
_> Average credit card debt per U.S. adult, excluding zero-balance cards and
store cards: $5,232.43_

That is amazing and terrifying.

~~~
arbuge
In a country with a GDP per capita (not per adult, to be clear - this includes
non-adults) of around $50k, why would you feel that's terrifying?

~~~
klodolph
Because we know that wealth is distributed unequally, and that a scrupulous
individual earning $35k gross might have a cash flow under $1k.

~~~
ptaipale
The debt is also distributed unequally. Mostly so that those who have more
wealth, have also more debt (though not 1:1 of course).

~~~
dionidium
On unsecured credit cards? I doubt it.

~~~
morgante
Wealthier people are the ones who _have_ unsecured credit cards. Banks
apparently have no problem giving me a limit of $50k without any sort of
collateral, but my dad can't get a credit card without depositing his entire
limit.

~~~
dionidium
I was given an unreasonable amount of unsecured credit when I turned 18, by
virtue, apparently, of the fact that I was now 18. It certainly wasn't because
I had any stable income or assets.

~~~
morgante
My point was that larger credit limits typically come on unsecured cards, not
secured ones.

For example, I can get a $20k limit card. It's pretty unlikely that you can
get a secured card with a $20k limit.

------
joslin01
Gather round and I'll tell you a tale of how to lose at the credit card game.

When I turned 18, I got my first credit card. I asked my father "good idea?"
and he said yea, good to build up credit. Ok then. A week later, my new card
with a whopping limit of $750. Never having experienced _not_ paying with cash
I had, it gave me an odd thrill and I went out to eat with my friends and
joked "It's like free money!" And despite knowing better, it certainly _felt_
like free money because the numbers didn't change in my bank account. Sure I
knew I'd have to pay it off, but whatever, I'd do that later.

Now, like all good citizens, I spent the first couple years always paying off
the balance I owed. Nor was it long before credit card offers came to me and I
said "hey good to build up credit" and signed up for them. My next big one had
something like $1500 limit and I was 19. Soon enough, I was doing great -- my
credit was high & debt low -- looks good for credit.

Well, soon enough I was in Boston going to college and working part-time. One
day at work, I got another one of these offers and thought "why not?" This
time was special though because it asked me what is your household income --
not _my_ income. Well.. my parents didn't make much but we weren't poor
either, so I added together the incomes and said my household income was
$150k. I felt a bit mischevious putting it down -- was it the truth? What was
going to happen? Would they check to see if _I_ made that much?

No, instead, they were more to happy to oblige and gave me (a 20 y/o) a new
credit card with _$12,500_ limit. Holy shit! I thought to myself, I have a LOT
of free money! Over the course of the next 4 years in college, I would eat out
whenever I pleased and generally kept my credit under control, but slowly &
surely my credit usage was rising. Fast forward a few years after that, and I
have a total credit line of about 30k -- all maxed out. Was I being outright
financially foolish ordering $100 bottles of Chardonnay at the club? Not at
all. Was I being financially negligent ordering whatever small thing came my
way that I wanted? Yes -- because I could.

So then you find yourself in deep debt, and what do you do? You start paying
the minimum off and then re-using that credit. Do you care so much about
paying it off? No that seems like an eternity away, paying the minimum is
easier. Do you know it's wrong? _Of course_. Do you care? Not as much as you
should.

This my friends is how you lose at the credit card game and end up just paying
fees to bank execs. It can be fun, but I do not recommend.

~~~
askldfhjkasfhd
Can you elaborate on how you perceive the difference between the two examples
here? Being financially foolish and negligent seem both to apply to your
experience.

"Was I being outright financially foolish ordering $100 bottles of Chardonnay
at the club? Not at all. Was I being financially negligent ordering whatever
small thing came my way that I wanted?"

~~~
itchyouch
A single large purchase is usually planned for and budgeted. E.g. buy computer
for $2k and pay it off over the next couple of months $300/mo at a time.
Though IMO, $100 of chardonnay at a club is pretty frivolous.

Usually it is a death by a thousand cuts when it comes to racking up credit
card debt. $20 for lunch, $50 for gas, $65 for some clothes, $100 for the
electric bill. The problem is that pseudo-necessities like food, gas,
entertainment don't have an end and reoccur indefinitely. It becomes really
easy to fall into the trap of purchasing 2x $10 meals a day, and it easily
becomes $600/mo, while the $200-300/month in groceries that were also
purchased with the plan to stop eating out makes for a $800-900+/mo food bill.

~~~
soylentcola
Yep. This is my failing as well. I don't carry a balance because thankfully,
my income is modest but I keep recurring expenses to a pretty strict minimum
(no car payment, cheap rent, only like $12k in college debt that I'm paying
off, etc).

Still, when I go through mental phases of not caring/not paying attention,
even though I'm paying off my balance and setting aside some savings every
month, occasionally I look at my statement and think "holy shit, how did I
spend $1500 that month?!"

Usually those are like the months where I bought one semi-pricey thing (under
$500 but still not just groceries and bills) plus a load of Amazon or Adafruit
or any number of little tools, toys, hobby supplies, lattes, bar tabs, etc.

Still no problems paying my credit card off every month because I've been
there and I'm not going back. Still, it's very easy to lose track if you get
spoiled and complacent. Sure, it's nice being able to spend a few hundred
bucks on supplies every time I want to take on a new project around the house
but those things really add up and eat into money I should be saving,
investing, or using to pay off that minor college loan earlier.

------
superuser2
I propose that credit card debt is simply the earliest signal of "not making
enough money to sustain the life you think of as normal."

We have not yet come to terms with the fact that the overwhelming majority of
people outside of a tiny sliver of elites are going to be lucky to afford bare
subsistence in the years to come. Credit card debt lets us delay confrontation
with the reality that wages have not grown enough, employment is not strong
enough for most people in middle-class jobs to live the lives we used to think
of as middle class.

Of course you reach for plastic before you stop buying groceries.

~~~
JonFish85
Credit card debt probably isn't the "earliest" signal of that. We've been
running pretty solid federal deficits for going on 40 years now -- that's
probably a good indication that people feel that they deserve more than they
pay for.

~~~
damptowel
Governments have been running deficits for 5000 years, it's how currency is
established.

~~~
toomuchtodo
US citizens are binging on credit to make up for stagnant wages. That's not a
theory, that's a fact. First it was housing, now its credit card and auto loan
debt.

Fun fact: Subprime auto loan bonds are in a slow motion trainwreck:

[http://money.cnn.com/2016/03/15/investing/subprime-unpaid-
au...](http://money.cnn.com/2016/03/15/investing/subprime-unpaid-auto-loans-
oil-crash/)

[http://www.bloomberg.com/news/articles/2016-03-21/this-is-
wh...](http://www.bloomberg.com/news/articles/2016-03-21/this-is-what-s-going-
on-beneath-the-subprime-auto-loan-turmoil)

~~~
mac01021
You're asserting that, if wages were not stagnant, people would not binge on
credit? Maybe that's true, but I doubt it's noncontroversial enough to be
declared "fact rather than theory".

------
siscia
Honest question. There aren't debit cards in the united states? They are
simple plastic cards like credit carda but the bank is withdrawing your money
directly from your account. There is not debt involved.

~~~
koenigdavidmj
Even those of us who don't carry a balance often prefer credit for the
additional fraud protection features. Can't do a chargeback on a debit card.

~~~
distances
I don't know how general this is, but I'd say it's common for banks to cover
also fraud costs for the customers in Europe. Be it fraudulent debit card
payments or Internet banking transactions, I've seen news of banks covering
the customer's ass on both.

Not sure how often they can reclaim the money, and how often they just take
the loss for better publicity.

~~~
uuoc
US banks make the same promises too.

But which would you trust more when something goes wrong and your "card
number" racks up thousands of stolen purchases:

1) credit card dispute/chargeback process that is mandated by law

2) the promise from your bank that, on their good will, they will fix things

Not only that, but thousands of dollars on your credit card is "loaned" to you
by the bank, the money's not out of pocket on you yet.

However, thousands of dollars of stolen debit card transactions means your
bank account is thousands of dollars lower immediately, and you have to hope
your banks promise to give it back will actually pan out.

~~~
madelinecameron
Also the fact that credit cards aren't your money you are spending.

If someone steals your credit card, you can say "Not my money! That's your
problem" while a debit card is the opposite. Plus banks employ people to fix
fraud while you (probably) don't.

Sure a bank will _eventually_ rectify debit fraud but in the mean time, why
would they care? It isn't their money.

------
tremon
I can't read the article, but the title is a non-sequitur: overdrawing is not
inevitably tied to bank cards. Other societies have things like a direct debit
infrastructure which allows consumers to use plastic cards without the risk of
overdrawing. That doesn't mean it's impossible though: many Dutch banks allow
the customer to choose his overwithdrawal limit. Mine is set to zero.

------
throwaway9574
I know some may criticize this, but I cut up my credit card soon after moving
into my first apartment. My wife and I use debit cards exclusively, but I know
it's only a matter of time before our card numbers get skimmed online or
through a hacked terminal. Does anyone know of any measures we could take to
minimize the effects when that does happen?

~~~
JoshGlazebrook
(not affiliated in any way) but privacy.com lets you hook up to your bank
account and lets you generate one time use card numbers for individual bills,
etc. They recently expanded to 15,000 banks/credit unions. It won't help with
physical card skimming, but for online stuff it can.

[https://privacy.com/](https://privacy.com/)

Another option is to use one credit card, and only use it for bills/budgeted
expenses and NOTHING more. Then just pay it off every month. This will prevent
your real money from being being stolen/frozen in the event of your card
number being lost/skimmed, and it can also gain you cash back and/or rewards.

~~~
blindfly
Not affiliated either but I love privacy.com! I've been using them since I saw
it on HN a few weeks back and no looking back. I regularly get to exchange
messages with the team and they've fixed many bug reports in record time
(nothing serious, just finicky stuff).

Unlike my credit card companies who refuse to get with the program and show me
auths and captures in somewhat real time. Having to wait days to find out what
went through is such a joke. I thought cards were supposed to be easier... if
I spent $10 in cash I know I've spent $10, with a CC I wait 3 days and find
out butterfingers misplaced the decimal and I'm left trying to hunt down
$1000.00 that's now on my account while I'm miles away.

------
Overtonwindow
It was interesting that a year ago the media was saying that Americans were
pulling back on credit use, and paying it down. [1] I'm curious if that was
honest reporting, or if something changed which caused people to spend more?

[1] [http://blogs.wsj.com/economics/2015/04/07/americans-pull-
bac...](http://blogs.wsj.com/economics/2015/04/07/americans-pull-back-on-
credit-card-debt-in-february/)

~~~
prostoalex
That is correct, the total outstanding debt was down as of year ago (side
benefit of lower gas prices leaving more cash in the pockets of consumers),
but the article mentions the banks have revved up their credit card
distribution since then:

"Because many creditworthy consumers are still cautious about spending,
lenders are turning more aggressively to subprime borrowers. Lenders issued
some 10.6 million general-purpose credit cards to subprime borrowers last
year, up 25% from 2014 and the highest level since 2007, according to
Equifax."

"Overall, lenders gave out more than 104 million general-purpose and store
credit cards in 2015, up 6.5% from a year earlier and up 47% from the bottom
in 2010, according to Equifax."

~~~
winslow
So we are back at the subprime lending model. Correct me if I am wrong but
from my understanding this is what ultimately caused (or one of the biggest
factors along with adjustable rate mortgages) the housing collapse and
economic downturn circa 2007/2008\. So how is this subprime lending any
different via the credit cards?

We could hypothesize that credit card debt won't be as massive as mortgage
debt and thus may not cause catastrophic events. However, on the flip side
there is little to no collateral in credit card debt that a creditor would get
in return of defaulting on your credit loan.

The more I look at credit debt, student loan debt, and fairly recently CDO's
(Collateralized Debt Obligation) that banks are doing again we are setting
ourselves up for failure again.

Anyone have any thoughts on all this?

~~~
prostoalex
As long as credit card debt is rated properly, its acquirers know exactly what
they're signing up for, and at certain point will exhaust the resources
they're ready to pour into junk-level securities (or at least be somewhat
contained by the public's appetite for junk).

The subprime mortgages propelled into the prime markets only after a major
insurer with a strong balance sheet announced that they will make their
investors whole in an [unlikely] event of a default, which led to ratings'
agencies decision to assign the AAA rating.

Without AAA, such securities are relegated to their own little corner of the
market, which sooner or later faces capital constraints.

------
mkj
What's the amount carried over each month (and interest paid)? That seems the
more interesting figure.

~~~
hyperpape
Given that this is > $12,000 for a family of four, I'm guessing that it's not
that much less, and at least half of it is carried over month to month, if not
more.

~~~
morgante
Why do you assume that?

I'm single but will sometimes have a debt of $10k in a month but never carry
any over.

~~~
mac01021
Impressive income.

~~~
ArkyBeagle
Or good with buffering/saving.

------
olivil
Is there a way to read the article without signing up or subscribing?

~~~
oarsinsync
I have this bookmarklet that I click every time I visit a page that is
paywalled, as many are open if referred via Google:

    
    
      javascript:(function(){location.replace('http://www.google.com/search?q='+document.URL)})()

~~~
killerbat00
If you update this to use window.location.href = url, you won't lose history
:)

------
Bombthecat
One trillion doesn't sound much compared to the rest.

------
n42
Sorry for being pedantic, but the correct term is "could not care less".
Otherwise you are suggesting that they do care.

~~~
deathcakes
I've had this conversation a good few times and I quite like "could care less"
\- to me it implies more choice on the part of the speaker. I COULD care less.
I have that capacity. I actively choose not to.

Although this is definitely not how people usually use it.

~~~
rsync
"I've had this conversation a good few times and I quite like "could care
less" \- to me it implies more choice on the part of the speaker. I COULD care
less. I have that capacity. I actively choose not to."

That is the dumbest thing I have ever read.

~~~
dang
> _That is the dumbest thing I have ever read_

Please don't post things like this to HN. (Broken windows aren't allowed, even
on the bikeshed.)

------
askyourmother
Best part is credit card debt is typically unsecured - spend, consume, enjoy,
stick up middle finger when repayment is due. Those who do repay will of
course sub those who don't over the long course in the variable rates and
fees.

~~~
TheOtherHobbes
Sticking up a middle finger will trash your credit rating and make it
impossible to get a mortgage.

In the UK you'll also be put through collections, which can include attempts
to force you to sell a property - if you own one - and/or most of your
possessions to repay the debt.

Credit cards may not be secured, but lenders have risk management divisions
who make some attempt to estimate default rates.

The biggest problem is the ridiculous rates for the riskiest borrowers. A few
cards have an APR of 99.9%, which _guarantees_ a default for anyone on a low
income who has to make an unexpected payment for any reason at all.

~~~
toomuchtodo
> Sticking up a middle finger will trash your credit rating and make it
> impossible to get a mortgage.

I walked away from an underwater mortgage on a townhouse. It only caused my
dropped my credit score ~100 points, and was eligible for another mortgage
after 3 years (My credit card provider didn't blink, and had no problem
allowing me to keep a charge card with high five figures of credit available).

The repercussions of credit default are highly overrated.

~~~
shanecleveland
That's incredible. I wonder how typical your experience is. I've considered
this strategy on a home we are forced to rent at a loss, as we'd be unable to
sell. But I couldn't bring myself to do it.

~~~
toomuchtodo
At the time, I was backed into a corner so to say. It wasn't something I went
into willingly.

My HOA would not allow me to rent the townhouse out (too many rentals
already), nor could I come up with the $150K to bring the mortgage down to the
new fair market value. So, mailed the keys back to the bank and walked away.

~~~
dragonwriter
> My HOA would not allow my to rent the townhouse out (too many rentals
> already), nor could I come up with the $150K to bring the mortgage down to
> the new fair market value. So, mailed the keys back to the bank and walked
> away.

Note that this doesn't actually work to reduce your debt everywhere (even
everywhere in the US); its basically voluntarily inviting the bank to
foreclose, which they usually will do (because if you are abandoning the
property and they don't, the longer they go before foreclosure the more likely
that, just due to being abandoned, the property will lose more value.) But
when they do foreclose, some jurisdictions allow foreclosure deficiencies --
that is, they allow the conversion of the amount of the mortgage debt that the
lender doesn't recover in a foreclosure sale to be collected as an unsecured
debt.

~~~
toomuchtodo
Yes! You're correct. But its not the same as, "If you default on you credit
cards or other debt, your life is ruined."

