Debt Consolidation Blog

US housing crisis as a result of liberal lending terms, now lenders are tightening their mortgage standards there by allowing only creditworthy customers to take new mortgage loans and tap the home equity line of credit. In such case, leaving Americans make use of credit card debt to meet their needs – drumming pricey and potentially volatile debt that lenders continue to offer.

As a result Americans are turning towards credit cards, according to economic data released by the Federal Reserve shows the highest amount recorded ever before which is not a good news in the middle of economic downturn given already the accrual of credit card debt over past years.

However, this increase in debt cannot be taken by surprise. With cost of all needs on rise along with unemployment rate peaking up, Americans have to use credit cards for their daily expenses like gasoline, grocery etc.

During the boom of housing industry, American could mange the rapid increase in the cost of living by cashing the price hike of their home prices. But this scenario had reversed with sub prime crisis over past few years; lenders have tightened their lending terms leaving the Americans no option but to rely on credit cards.

Americans are deep in debt because credit cards have higher carrying cost than any other forms of debt due to high interest rate and other hidden costs. Still the credit cards are pushed by the lenders into the market and it has been reported that over 6 billon mails are sent to Americans every year.

An average American family holds around $10,000 in credit card debt. In the present condition, gone are the days when Americans were not supposed to think twice about spending on luxurious things. With new rule passed in senate about the credit cards interest rates tightening might once again go out of control of their spending habits.

Interestingly by the end of financial year march 2009, outstanding credit card debt fell down by $11.1 billon to $2.55 trillion and according to Federal Reserve, credit card debt fell for six consecutive months by $5.4 billion to $945.0 billion.

This decrease in credit card debt levels are as a result of Americans tightening their belts temporarily. For ex: consider residents of Florida where the metropolis has fully affected from real estate crash which resulted in 12% decrease in hotel occupancy, an increase in unemployment rate to 8.5%, and foreclosure rate to 9% for the first quarter of 2009. As a result Miamians owe more of their personal income to credit card companies compared to other states of US.

Equifax, one of the largest consumer credit reporting agencies conducted a research for 50 largest metropolitan statistical areas for the first quarter of 2009 and concluded that most places on the list are not too surprising. With housing crash and reduced tourism, consumers are still spending and digging their feet much deeper.

Despite the consequences of what is driving to spend, Americans are still in deep of debt.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

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