Revolving debt problems

“Research shows that between 1989 and 2006, the nation’s total credit card charges increased from about $69 billion each year to more than $1.8 trillion,” said Michael Joyce, CFA, CFP®, chairman of the NAPFA Consumer Education Foundation Board. ________________________________________________________________ I know from the level II materials that credit card debt can be/is securitized the same way that mortgages have been. I have no working knowledge of these markets so this question may be ignorant, but is there a chance that we see increasing defaults on CC and therefore problems with these securities? Are there even that many of them?? I would think they would be much easier to model. Anybody have any insight in this area? Thanks in advance.

I was posting about this this morning (see the CDS thread) In my humble and unknowledgable opinion, you are unlikely to see the magnitude of loss in value or default in these securities. This would be due to the fact that the underlying assets (card receivables) arent really going to just all of a sudden see their value evaporate like has happened to home values. You will no doubt see some rise in default due to unemployment, but I would be surprised if it is on the level of MBS stuff.

Also…people pay their credit cards before they pay their mortgage now. Sad, but true.

do those “credit card charges” include anything going over VISA/ Mastercard networks. And if so, does that mean that anytime you swipe your bank debit card as ‘credit’ and sign for it the amount is included in that figure. If so the increase is very much inflated considering it was in the early-mid 1990’s that everyone started really using debit cards in lieu of cash/checks.

CFA500 Wrote: ------------------------------------------------------- > Also…people pay their credit cards before they > pay their mortgage now. Sad, but true. This IS really sad.

But credit cards don’t have underlying collateral. They’re unsecured loans. Or is there something I’m missing?

Maybe its a case of easy come, easy go These people that shouldnt have bought homes in the first place, that put 0% down, saw their homes depreciate so they have no equity, just walk away, go back to renting, no skin off their back. Now if they dont pay their CC and that spigot gets turned off, cant continue to live above their means. Maybe thats the reason.

I found a guy here in california who bought two houses with no money down. He NEVER paid a dime in mortgage or property tax on either house. He rented one house out (a little income ya know) This was in 2006 and 2007. He’s still in possession of both houses. The bank is after him so for one house he has submitted a short sale package for less than the notes (there are 2 bank loans on that house, indymac and citibank). I know all this cuz I’m the bidder.