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The United States of Cash Strapped Americans

It looks a lot like 2008 all over again

Written by Brian Hicks
Posted February 27, 2012 at 2:25PM

With homeowners struggling to stay above water, credit card companies must worry about further delinquency problems, as credit card debt balloons.

Instead of just using credit cards for big ticket items (TVs, furniture), Americans are now charging gas, food, and even paying other bills with them. And some are only making minimum payments... if they can afford even that.  It's far more difficult these days for many consumers to dig their way out of debt, since other relied upon options, such as home equity lines of credit, are no longer readily available.

National revolving debt just hit a record $957 billion in April, from $800 billion four years ago. Total credit card debt was up by 0.4% in April, according to the Fed. And Moody's is reporting that the charge-off rate, which measures credit accounts considered uncollectible, hit 6.27% in April.

Q1 consumer borrowing skyrocketed to $34 billion, the biggest amount since 2001 when the U.S. was diving into a recession. And not all of that may be paid back. Credit card investors are becoming increasingly concerned that a weaker U.S. economy will hurt borrowers' ability to pay back debt.

Hit by cash-strapped consumer reliance on plastic amid rising gas prices, a housing slump, and rising employment, credit issuers could see earnings wacked by defaults.

"The deterioration in credit cards is accelerating faster than many had expected," said Christopher Wolfe, an analyst at Fitch, according to CNN Money. "The message we are trying to deliver is that things are going to get worse before they get better. Thus far, credit card businesses have been profitable but that could change."

That was 2008.

Four years later, we're still dealing with high gas pries ($109 with $4 to $5 gas pump prices), high unemployment, housing issues, and Americans struggling with debt.

In fact, according to the New York Post, “More American households are falling back into the debt hole, this time without the safety net of home values to help bail them out.”

In 2011, “total US consumer debt hit its highest peak in more than a decade.  In December 2011, the total consumer debt -- which is the combination of non-revolving and revolving debt -- rose by some 9.3 percent to $2.498 trillion, according to the latest Federal Reserve Board numbers,” as reported by Fox.

“Both revolving debt and non-revolving debt increased. Revolving debt, which is credit-card debt, went up by 4.1 percent. Non-revolving debt, which includes loans for cars and education, rose 11.8 percent, the central bank's report said.”

"Consumer credit increased at an annual rate of 7.5 percent in the fourth quarter. Revolving credit increased at an annual rate of 4.5 percent, and non-revolving credit increased 9 percent in December," the Fed wrote in a note along with the latest monthly report, which also reviewed 2011."

It's still looking a lot like 2008 out there....

Credit card stocks will come down... with the exception of Mastercard (MA:NYSE) and Visa (V:NYSE).

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