How Is Debt Going Away… Revisited
Since I took the time to argue, last month, that the slow pace of paying down debt, as compared with giving banks no choice but to write it off, means that a whole lot of debt has to be paid down to balance out each default. Michelle Singletary would say that I’m being too charitable:
CardHub’s analysis found that credit card debt for the second quarter of this year decreased by about $12 billion compared with the previous quarter. But banks charged off $21.8 billion during the same period. Given that the drop in outstanding debt is smaller than the dollar amount that was charged off, the difference of $9.8 billion is the amount of debt consumers accumulated, Papadimitriou said.
His findings give a more realistic view of how seriously the recession has crippled consumers. The charge-offs also indicate that many banks are continuing to experience deep losses, and this is one of the reasons why credit is still tight. It’s why many lenders have been cutting people’s credit limits, he said.
The Wall Street Journal analysis that I cited in the first link, above, found that some debt was indeed being paid down. The difference between that and CardHub’s numbers appears to be that the former is all debt, while the latter is credit card debt. That could mean, in other words, that folks are paying off longer-term debt while still living off of their credit cards.
Whatever the case, Americans still have much work to do breaking their addiction to swiping plastic.