NEW YORK – Credit card companies can thank the economic recession and rising unemployment for what will be a record 8% charge-off of uncollected debt next year.
A recently released Standard & Poor's report "Over Our Heads: Can U.S. Consumers Repay Their Debts in the Recession?" finds that since the late 1990′s Americans have outspent their incomes and acquired record debt particularly on credit cards.
According to the report's author S&P Chief Economist David Wyss, our savings rate, which sunk to .9% in November, combined with zero-rate auto-financing deals and low mortgage rates have further aggravated the build-up of debt.
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Wyss views non-mortgage debt as the most worrisome and points to those who use credit cards to pay for non-essentials as more likely to default on their credit card payments. "People who borrowed to buy a house should survive this mild recession, but those who were borrowing to buy vacations may not," said Wyss.
According to CardWeb.com, the average American household with at least one credit card has $8,523 in credit card debt, and the average credit card interest rate was 14.4% in November 2001.
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