More bad news about Americans' debt
According to this article in the Wall Street Journal, the rate of credit card charge-offs rose in November from 10% to 10.6% after declining for the past two months, and delinquencies continued a four-month rise, hitting 6.2% in November. Delinquencies are payments that are 30 days or more past due. Charge-offs are balances that the card company writes off as a loss and gives up on (generally, they sell the debt for pennies on the dollar to a third-party debt collector).
Moody's predicts that the charge-off rate will continue rising and eventually peak in the middle of this year. In other words, it's going to get worse before it gets better.
Even more worrisome is data that shows Americans are paying down less of their collective principal than they were just recently. The payment rate fell nearly a full percentage point in November to 16.42%.
This is bad news for delinquent cardholders individually; it's also bad for the economy as a whole. While experts have recently mentioned some encouraging signs like lower unemployment claim filings and small growth in the manufacturing sector, this recovery still has a long way to go.
High rates of unpaid credit card debt affect both consumer spending ability and consumer confidence. Both of these, in turn, directly affect the unemployment rate, since companies won't hire people to make goods or staff stores if they perceive that spending is under siege.
If this sounds like a vicious cycle, it is. While we here at Walletpop hear on a regular basis from readers who have sworn off credit card balances and stick to buying only what they can pay for at the time, there are obviously many Americans still stuck in a downward spiral of debt. Until enough people can get out from under those crushing bills, this debt is going to drag on the nation's economic recovery.