Consumers may face the loss of $2 trillion of credit card liquidity as card issuers raise interest rates and reduce lines of credit over the next 18 months. Home values continue to decline as well making it harder for consumers to access home equity lines of credit as well. Consumers are now spending less and less money at retailers due to liquidity loss. The automotive industry has seen drastic declines in sales as dealers find it harder to acquire loans for their customers.
The United States has been over extending themselves with credit cards, auto loans and extravagant mortgages for many years. The effects we are now feeling on the economy is much like the effect we feel after drinking to much alcohol or even just over eating. Americans have over spent themselves sick.
As consumers we need to learn how to use our credit responsibly. Credit cards need to be used with prudence with making purchases. Consumers need to budget their money and not overextend their credit card debt. Set a limit for yourself that you will charge on a monthly basis and be sure to pay the balance in full every month. For large purchases where you plan to spread you payments, be sure to make a set plant as to how much you will pay each month to pay off your expensive item in a reasonable amount of time. Purchase less on your credit at once, pay your debt and then you can purchase something else again.
China and Japan will not see the consumer credit problems that we have seen in the Untied States and in Europe. The Asian culture is much more conservative and has strong beliefs about credit. Chinese and Japanese will save for large purchases as opposed to buying on credit. According to Federal Reserve figures, the American consumer has accumulated almost $14 trillion in debt. On the other hand, the Japanese have accumulated a total of $16 trillion in savings.
American consumers should learn from their Asian counterparts. Spending on credit has exceeded what we can afford. Unfortunately, creditors have not put many requirements on consumers either. There was a recent blog called “I am being foreclosed” or something to that affect, about a very novice real estate investor who over extended himself. At a very young 20 something years of age, this individual purchased seven houses that he was going to “flip”. He bought one, got excited and kept buying six more, even before selling his first “flip’. In order to secure financing, this individual used a mortgage application intended for the self employed. On this application, he was able to make up his income while lenders did not bother to verify what he was stating. This is what I would call downright lying. Furthermore, this individual is now (or was) facing Federal charges. This type of irresponsible lending on the parts of both consumers and lenders has come to a screeching halt.
Luckily I was able to learn this lesson at a relatively young age. There was a time that I had a business generating my partner and me a substantial amount of money. Furthermore, our source of income was from one client. We both made many unnecessary purchases and spent a lot more than we should have. Inevitably, when we lost the client, we lost the money. All of a sudden we had overspent and found ourselves without a major source of income. This taught me quite a good lesson. Consumers and lenders are now finding themselves having learned new lessons as well. We must all learn from the lessons of the past and march forward towards the future.
The United States has been over extending themselves with credit cards, auto loans and extravagant mortgages for many years. The effects we are now feeling on the economy is much like the effect we feel after drinking to much alcohol or even just over eating. Americans have over spent themselves sick.
As consumers we need to learn how to use our credit responsibly. Credit cards need to be used with prudence with making purchases. Consumers need to budget their money and not overextend their credit card debt. Set a limit for yourself that you will charge on a monthly basis and be sure to pay the balance in full every month. For large purchases where you plan to spread you payments, be sure to make a set plant as to how much you will pay each month to pay off your expensive item in a reasonable amount of time. Purchase less on your credit at once, pay your debt and then you can purchase something else again.
China and Japan will not see the consumer credit problems that we have seen in the Untied States and in Europe. The Asian culture is much more conservative and has strong beliefs about credit. Chinese and Japanese will save for large purchases as opposed to buying on credit. According to Federal Reserve figures, the American consumer has accumulated almost $14 trillion in debt. On the other hand, the Japanese have accumulated a total of $16 trillion in savings.
American consumers should learn from their Asian counterparts. Spending on credit has exceeded what we can afford. Unfortunately, creditors have not put many requirements on consumers either. There was a recent blog called “I am being foreclosed” or something to that affect, about a very novice real estate investor who over extended himself. At a very young 20 something years of age, this individual purchased seven houses that he was going to “flip”. He bought one, got excited and kept buying six more, even before selling his first “flip’. In order to secure financing, this individual used a mortgage application intended for the self employed. On this application, he was able to make up his income while lenders did not bother to verify what he was stating. This is what I would call downright lying. Furthermore, this individual is now (or was) facing Federal charges. This type of irresponsible lending on the parts of both consumers and lenders has come to a screeching halt.
Luckily I was able to learn this lesson at a relatively young age. There was a time that I had a business generating my partner and me a substantial amount of money. Furthermore, our source of income was from one client. We both made many unnecessary purchases and spent a lot more than we should have. Inevitably, when we lost the client, we lost the money. All of a sudden we had overspent and found ourselves without a major source of income. This taught me quite a good lesson. Consumers and lenders are now finding themselves having learned new lessons as well. We must all learn from the lessons of the past and march forward towards the future.
Labels: consumer debt, credit cards
Credit Card / Financial news blog post by Todd Holliday at 7:35 PM 