Comments on: The real reason credit card balances are falling http://totalcandor.com/blog/2009/12/the-real-reason-credit-card-balances-are-falling/ A Conversation About Income, Wealth, and the Steps in Between Wed, 08 Sep 2010 17:40:09 -0700 http://wordpress.org/?v=2.8.5 hourly 1 By: Adam http://totalcandor.com/blog/2009/12/the-real-reason-credit-card-balances-are-falling/comment-page-1/#comment-156855 Adam Sat, 12 Dec 2009 00:01:47 +0000 http://totalcandor.com/blog/?p=868#comment-156855 Michael: The New York Times shares your opinion as well: http://www.nytimes.com/2009/12/12/business/economy/12charts.html?hpw -Adam Michael:

The New York Times shares your opinion as well:

http://www.nytimes.com/2009/12.....s.html?hpw

-Adam

]]> By: Michael http://totalcandor.com/blog/2009/12/the-real-reason-credit-card-balances-are-falling/comment-page-1/#comment-156808 Michael Fri, 11 Dec 2009 13:23:00 +0000 http://totalcandor.com/blog/?p=868#comment-156808 @Abigail: Thank you for your comments. At the end of the day, it sounds like we're in the same boat with respect to our expectation that real change isn't likely to be long-lasting. As to your comments about write-offs, here's my thinking: If, last year, you were a little behind (or even current) with a big balance, it would be part of the revolving balance. Now, this year, let's say you're so far behind that your balance is written off. As you point out, you're no longer part of the revolving balance statistic. Therefore, by having your balance written off, you've helped the <i>national</i> average. It's kind of like when an unemployed person stops looking for work or takes a part-time job - he'll <a href="http://totalcandor.com/blog/2009/12/the-real-unemployment-rate/" rel="nofollow">no longer be considered part of the unemployed for statistical purposes</a>. The <i>country</i> looks better, but <i>he</i> certainly is not. @Abigail: Thank you for your comments. At the end of the day, it sounds like we’re in the same boat with respect to our expectation that real change isn’t likely to be long-lasting.

As to your comments about write-offs, here’s my thinking:

If, last year, you were a little behind (or even current) with a big balance, it would be part of the revolving balance. Now, this year, let’s say you’re so far behind that your balance is written off. As you point out, you’re no longer part of the revolving balance statistic. Therefore, by having your balance written off, you’ve helped the national average.

It’s kind of like when an unemployed person stops looking for work or takes a part-time job – he’ll no longer be considered part of the unemployed for statistical purposes. The country looks better, but he certainly is not.

]]> By: Abigail http://totalcandor.com/blog/2009/12/the-real-reason-credit-card-balances-are-falling/comment-page-1/#comment-156780 Abigail Fri, 11 Dec 2009 07:22:20 +0000 http://totalcandor.com/blog/?p=868#comment-156780 I agree that part of the falling-balances situation is because companies are cutting credit lines. But I have to disagree about the write-offs. If you get so far down past your due-date that your balance is written off, you're generally no longer an active customer. Which means your account wouldn't be categorized as a "revolving balance." Revolving balances are only the ones that are still active -- if you pay it down, you have it available again. I think mostly it's just people panicking. They finally realize that they have to get rid of the higher balances because they're in trouble if money dries up. (Or they become unemployed and realize that they had better pay down whatever they can while the unemployment pay is still available.) That said, I, too, am not at all excited by the new statistics. People have "learned their lesson" off and on again for decades. It doesn't last. I really doubt that this instance will make much more of an impression. I suppose a few will stay frugal. But there are too many shiny things out there, and the American public has too short an attention span. I agree that part of the falling-balances situation is because companies are cutting credit lines. But I have to disagree about the write-offs.

If you get so far down past your due-date that your balance is written off, you’re generally no longer an active customer. Which means your account wouldn’t be categorized as a “revolving balance.” Revolving balances are only the ones that are still active — if you pay it down, you have it available again.

I think mostly it’s just people panicking. They finally realize that they have to get rid of the higher balances because they’re in trouble if money dries up. (Or they become unemployed and realize that they had better pay down whatever they can while the unemployment pay is still available.)

That said, I, too, am not at all excited by the new statistics. People have “learned their lesson” off and on again for decades. It doesn’t last. I really doubt that this instance will make much more of an impression. I suppose a few will stay frugal. But there are too many shiny things out there, and the American public has too short an attention span.

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