[HN Gopher] US credit card defaults jump to highest level since ...
___________________________________________________________________
US credit card defaults jump to highest level since 2010
Author : marban
Score : 158 points
Date : 2024-12-30 18:41 UTC (4 hours ago)
(HTM) web link (www.ft.com)
(TXT) w3m dump (www.ft.com)
| swalling wrote:
| http://archive.today/N59nk
| mcnamaratw wrote:
| The economic boom isn't helping everyone.
| jmclnx wrote:
| >Credit card lenders were happy to help, signing up customers
| who might not have qualified in the past based on income, but
| looked like safe debtors because their bank accounts were flush
| with cash
|
| To me that is the biggest reason.
| philip1209 wrote:
| Wasn't this sometimes a bug instead of a feature?
|
| Loaning based on cash instead of income is how Brex and Ramp
| took on Amex.
|
| (obligatory: "commercial != consumer")
| delfinom wrote:
| That seems to defeat the narrative of "the consumers are
| struggling due to high interest rates". If they have the cash
| in their accounts, they shouldn't be the ones largely
| defaulting.
| connicpu wrote:
| They had cash when they signed up, they don't anymore
| jandrese wrote:
| I think the story is that the COVID stimulus checks meant
| that people who normally live paycheck to paycheck were for
| the first time showing a healthy bank balance which
| increased their credit score just enough to qualify. Once
| the checks stopped they stated defaulting.
| losteric wrote:
| Since when is bank balance considered in credit scores
| and checks?
| jandrese wrote:
| Since forever? Part of the assets/debt ratio.
| do_not_redeem wrote:
| I'm gonna need a source on this one.
|
| https://www.myfico.com/credit-education/whats-in-your-
| credit...
| etempleton wrote:
| I wonder to what extent credit card issuers factored-in
| pandemic related stimulus into their risk models. If they
| really considered cash on-hand as a replacement to verified
| income the stimulus payments would have completely
| invalidated their existing models.
| asdev wrote:
| it was never an economic boom, just an inflationary boom. AI
| hype created an echo bubble from 2021 but it's due to pop
| misiti3780 wrote:
| I agree it's going to pop. Unfortunately the market turn will
| be hard to short as far as i can tell.
| jraby3 wrote:
| It was an economic boom based on debt. The US faired much
| better than europe but most likely due to the massive debt we
| used and then gave to our citizens (and businesses).
| chasd00 wrote:
| Yeah I feel the same. Going to adjust to a more conservative
| portfolio soon and try to minimize the damage to ye'old 401k
| delfinom wrote:
| It is helping the wealthy, about all the government cares about
| really.
|
| And "low unmployment" and not "median income vs cost of
| living/inflation".
| paxys wrote:
| There's no economic boom, just a stock market boom. People are
| helped in proportion to the money they have in the market.
| yieldcrv wrote:
| I wish a President would say that
|
| as well as publications leaning either direction
| UncleMeat wrote:
| Real wages are up, especially for lower earners. Unemployment
| is low.
| vladimirralev wrote:
| Real wages are not up for low earners. This is such an
| obvious math flaw I can't understand how nobody is
| challenging it. Real wages are adjusted for average
| inflation based on all consumers. However low earners
| experience much higher inflation than the average, at least
| double, and their consumption is vastly different (all of
| it is housing, food and energy in that order). Many of
| these low wage earners are periodically homeless or
| otherwise avoid paying bills to begin with.
| TeaBrain wrote:
| Real median wages for full time workers are up a little
| less than 2.5% since Q4 2019. It could be worse, but it's
| not really something worth getting excited over.
|
| https://fred.stlouisfed.org/series/LES1252881600Q
| nerdponx wrote:
| There was a huge corporate profit boom as well.
| vladimirralev wrote:
| And it's not so much that the stock market is booming, rather
| the value of the dollar is imploding. Those are equivalent
| statements but media chose to preset the "number go up"
| picture. Reality is for every number that "goes up", another
| number goes down, and the number that goes down is the value
| of cash.
| fldskfjdslkfj wrote:
| Doesn't seem to be much movement in mortgage defaults:
| https://fred.stlouisfed.org/series/DRSFRMACBS
| jraby3 wrote:
| Credit cards are probably an earlier indicator than mortgages.
| paxys wrote:
| Wait for all the 2.x% 7/1 and 5/1 jumbo ARMs issued between
| 2015-2022 to renew at 7%+ and we'll see how strong the mortgage
| market actually is.
| selectodude wrote:
| All? I'd be shocked if 5 percent of mortgage originations in
| the US are ARMs.
| eightysixfour wrote:
| They were very low leading into the increased interest
| rates - 4% in 2021. In 2023 it was closer to 10% of
| originations.
|
| https://www.investopedia.com/arm-applications-grow-as-
| mortga...
| drewg123 wrote:
| According to https://point.com/blog/arm-report-2024, ARMs
| were 10-20% of mortgages 2015-2020
|
| So I think the GP has a good point.
| nipponese wrote:
| Where is the ARM mortgage data?
| jandrese wrote:
| Why the hell would you get an ARM when the fixed rate was 3%?
| The only way to go from there is up.
| dylan604 wrote:
| There are a lot of people just uninformed people that will
| take whatever deals presented when that deal means getting
| a house. The person giving them the deal does not care at
| all about whether they can afford it or not, especially
| knowing that the loan was going to be repackaged and sold
| probably before the first payment was due let alone when
| the rates change
| jancsika wrote:
| Well, 2015 was about 10 years ago now, and both 5 and 7 are
| less than ten.
|
| So how about you tell us how _some_ of them have already done
| renewing at 6%+? Did bad things happen?
|
| Edit: clarification
| hipadev23 wrote:
| It did not become particularly easier to qualify for new
| mortgages over the past five years the way it did in 2004-2008.
| Nominal prices accelerated, yes, but rates were around 2.5%.
|
| Generally speaking people who are in mortgages are able to
| afford them because they're on fairly decent terms and lent to
| people who are capable of paying. But nobody is selling if
| they're going to need a new mortgage.
| bearjaws wrote:
| Thats because anyone with a 2.5% mortgage would rather die
| before losing their home.
|
| 34% of mortgages are below 3% interest rate, which means their
| house payment is at least 30% cheaper than renting. Nobody is
| going to give that up easily.
|
| Here you could easily go from a 3/3 single family home to a 2br
| apartment for the same price monthly. Which means you would
| need to move into a 1br apartment to save any money.
|
| All this to say, the first thing to go is the credit card
| payments, then the car payments, and finally the mortgage
| payments.
| reactordev wrote:
| This. Anyone I know that has a sub 3% is planning on staying
| put until their end. The rest of us are never going to see
| sub 3% in our lifetimes again. 6% is here to stay. Maybe in
| the distant future we hit 5.5% but unlikely.
|
| I went through a divorce and my ex got the house. I thought I
| would travel for a few years before buying another one and I
| missed out on the 3% rates.
| jghn wrote:
| I don't disagree but people talking about current rates as
| if they're terrible distort reality. It really wasn't
| _that_ long ago (aughts) that rates in the 5 /6% range were
| viewed as historically good. And I'm old enough to remember
| when rates in the teens were normal.
| polymathemagics wrote:
| Yeah, and for a lot of earners in high tax states, the
| effective interest rate you pay is essentially almost
| half off thanks to the mortgage interest tax deduction.
| If your marginal tax rate across federal / state / local
| is high (mine's 46%), then you can get back almost half
| the interest. Which shortens the gap between a 3% vs 6%
| mortgage, the effective difference being more like 1.5%
| than 3%.
| flatline wrote:
| I got a 3.25% loan post-divorce in a part of the country I
| hated, and ended up selling and relocating. I do not plan
| on buying again soon, current prices combined with current
| interest rates make it unappealing. If home prices come off
| or stagnate long enough, I will once again consider buying.
| Right now I can set aside $1000/mo renting, which is enough
| to pay someone else for the hassle of maintaining a house.
| lm28469 wrote:
| 6%?! Damn in France we went from 1% to 4% and it felt like
| the end of the world, 6% is insane
| silisili wrote:
| Never say never. It may be a long while til we see 3%, but
| 5.5% isn't far off. Some saw about that during the recent
| dip a few months ago.
|
| There are of course a lot of factors, but I think we'll be
| back in the high fives at some point in 2025 and settle
| around 4.5-5 after that. That's if Mr Tariff doesn't spike
| inflation.
| trenning wrote:
| Counter point, I have a 2.25% fixed 30yr but am looking to
| sell in the next couple months.
|
| Reason being I'm in a townhouse. They do not appreciate at
| the same rate as single family detached and it also carries
| an endlessly increasing hoa fee.
|
| Due to the hoa increases it also limits how well a property
| can cash flow as a rental so keeping the property as an
| investment is doubly less attractive as often you can forgo
| rental income in lieu of asset appreciation.
| ethagnawl wrote:
| > All this to say, the first thing to go is the credit card
| payments, then the car payments, and finally the mortgage
| payments.
|
| I do wonder how much of these credit card balances are people
| paying ~$3.50 per gallon to fill up and kit out SUVs and
| trucks they're paying ~$700 a month for.
|
| As someone who strives to spend/save responsibly and drives
| wholly owned used cars and is still a few paychecks away from
| disaster, I do not understand how working/middle class people
| are keeping up with these costs. I notice our local Chevy
| dealership is also full to the brim (literally covering all
| of the grass on their lot) with new trucks and SUVs. I would
| love to better understand who is buying/leasing those
| vehicles and how they're keeping them on the road -- for now.
| arealaccount wrote:
| Can confirm - if I moved to a home that was the same price
| ignoring realtors fees and whatnot, my 2000/mth mortgage
| would go to almost 4.
| HaZeust wrote:
| Man, I hate when mortgage defaults are brought up in
| conversations like this. The next frustration in the economic
| boom-bust cycle is 99% likely to NOT come from mortgage-backed
| securities or anything mortgage-based.
|
| Yes, we understand it triggered the 2008 recession.
|
| No, it probably won't be the canary in the coalmine for the
| next one.
| BJones12 wrote:
| > Credit card delinquency rates... remain nearly a percentage
| point higher than they were on average in the year before the
| pandemic.
|
| Just another journalist trying to scare you. All that happened is
| bad debt rose 1% compared to 5 years ago.
| KingOfCoders wrote:
| 1pp != 1%
| add-sub-mul-div wrote:
| Going from 5.2 to 6.1 is a 17% increase, which isn't
| insignificant.
| n144q wrote:
| 1. The title still isn't wrong. 2. What does 1% mean in
| context?
| yieldcrv wrote:
| Looking at the velocity of how we got to this level is
| absolutely noteworthy
| blueelephanttea wrote:
| Not only that, but the headline is a non-inflation adjusted
| value! We're still well below the peak of 2010!
|
| We might be on the cusp of a collapse, but the media (and HN
| commentators!) continue to predict 3465 out of the last 2
| recessions.
| piva00 wrote:
| I mentioned to another comment, you're correct about the
| figure amount but the concerning part is:
|
| > Credit card lenders wrote off $46bn in seriously delinquent
| loan balances in the first nine months of 2024, _up 50 per
| cent from the same period in the year prior_ and the highest
| level in 14 years
| jimmytucson wrote:
| Anecdotal but my spending habits changed a lot during lockdown
| and it's been an uphill battle to get them back to normal.
|
| There was a period there where we were flush with valuable cash
| that you wanted to just spend, just for the dopamine hit in some
| cases, but also because you knew the cash was going to be worth
| less over time. Getting stimulus checks was a bit of a mindfuck
| too. We still shop almost exclusively on our phones, and it's so
| easy to just "add to cart" and have someone put it in my trunk or
| drop it at my doorstep.
|
| Cut to a few years later and the cost of things has risen faster
| than my income and my brain is still "COVID rich", I can see why
| credit card balances are higher and defaults are more common.
| lowercased wrote:
| That seems odd. I got stimulus checks too, but I never once
| felt "covid rich", and my spending patterns during 2020-2023
| hardly changed at all.
| Lord_Zero wrote:
| To a lot of people that was more money they have ever had all
| at once that wasn't immediately eaten up by bills.
| jopsen wrote:
| Stimulus checks might affect some income levels more than
| others.
|
| And some people more than others.
| gnatolf wrote:
| This is such an odd take
| skybrian wrote:
| If you're worried about inflation, why not invest the money?
| jimmytucson wrote:
| Oh, I definitely did invest some of it (if you can call
| playing with cash in a brokerage account investing), and
| seeing some of the returns I got made me feel even richer.
|
| I should stress that I am not a totally rational or
| irrational actor, I'm pretty much average intelligence, and
| this is one person's anecdote.
| chung8123 wrote:
| It is very hard to cut spending. This is why when you get a
| raise they say to not raise your living costs. I am sure this
| has been studied but going from even temporary luxury back to
| normal spending is tough.
| yulker wrote:
| How does $2k spread across a couple of checks make people feel
| they were "COVID rich" is something I just can't wrap my head
| around. Even for someone with a low income this would amount to
| at most a paycheck or two extra
| jimmytucson wrote:
| It wasn't just the stimulus checks, it was also the increase
| in income from job hopping, seeing my 401k and brokerage
| accounts explode, etc. I'm not saying it was rational or that
| stimulus checks weren't a good idea, I'm just reflecting on
| my own personal psychology. Not surprised it doesn't match
| everyone's!
| chrisweekly wrote:
| citation needed by me (sorry) but a few years ago I was
| surprised by an apparently validated assertion that something
| like 60% of all US households would be unable to come up with
| more than $2k cash given a month's time
| whaleofatw2022 wrote:
| I believe it. Happened to me once or twice when I was
| making under 50k/yr over a decade ago.
| jeffbee wrote:
| I think what you wanted to cite is "Financially Fragile
| Households", Lusardi et al, 2011. But, instead of getting
| the conclusion from the opinion page of the WSJ it would
| probably be better to read the paper and especially the
| notes by reviewers at the end of the article, particularly
| the comment of Pence which is almost a rebuttal.
| conductr wrote:
| $2k is massive sum for most US households. Many are a flat
| tire away from bankruptcy, they lean on cash advances and
| their communities to help them through simple things like a
| flat tire.
|
| I grew up kinda poor and lived this as a kid, my family was
| always helping or being helped by a neighbor or something.
| Through my friends and some extended family I knew these
| things were like a sign of our "class" and even slightly
| more secure people would never do them, it would even be a
| social faux pas to even ask for help. Now, at middle aged,
| I've done pretty well for myself and sometimes make other
| types of faux pas statements like "just buy a new car
| instead of dealing with that". I have to be somewhat
| mindful that even a 10 year old used car is a huge purchase
| for many people. Even if it's in good shape and can get
| another 5-10 years out of it, and would technically be the
| best move, it's not viable if they can't afford it or have
| to subject to some usurious loan.
|
| TBH I generally like to just take the "it's impolite to
| talk about money" approach unless I know the person well
| enough. Although I'm a financial professional so people
| tend to like asking my opinion/advice on a lot of things,
| even if I barely know them, I have found that I prefer to
| avoid those types of conversations altogether until I know
| you pretty well.
| whaleofatw2022 wrote:
| There were lots of cases where covid unemployment pay was
| better than better than minimum/near minimum wage.
| IncreasePosts wrote:
| You might not understand how precarious many people's
| spending habits are. After all of your bills and necessities
| are paid, many people only have a few hundred dollars per
| month spare. So if you get $2,000 popped in your lap, that
| might be the equivalent of 9 months of fun time money for
| them.
| SoftTalker wrote:
| The weird thing to me is, that knowing full well how
| important every dollar is, most people in this sitution
| would blow that $2k on frivolities, rather than save it or
| try to make it last. It's part of the psychology of being
| poor. Money is something that never lasts, so when you have
| some, you're inclined to spend it immediately.
| hansvm wrote:
| It's something like 4 post-tax paychecks for people at
| minimum wage, even better if they weren't full-time (more
| common than you might imagine even amongst people trying to
| move up, since low-wage employers tend to shove hours down so
| that you don't accumulate overtime if they have to call you
| in suddenly, and they all want you to work the same busy
| hours, making truly non-overlapping jobs challenging to come
| by).
|
| I've been that poor before (never _truly_ struggling like
| some countries experience, but unable to comfortably afford
| both food and a roof), and some other units might make that
| check make more sense:
|
| - 4.5 yrs worth of rice, flour, or beans (the bulk of my diet
| by weight and by cost)
|
| - 5 months of rent
|
| - 5.5 yrs of electricity (almost all of which went to cooking
| or refrigeration -- heat was unnecessary unless it was under
| 0F outside)
|
| - a new-to-me car, enough money for the parts that I'll
| inevitably have to buy to fix any used car shortly after I
| buy it, and enough gas to drive to work for a year
|
| When you're struggling paycheck to paycheck, that's a life-
| changing amount of money. I'd already escaped that life by
| the time covid hit, but if I hadn't then that might've been
| my ticket out.
|
| As to how somebody in better circumstances might be "COVID
| rich"? I can only speculate, but even in the middle class
| people tend to have a number of "essential" payments: health
| insurance, mortgage/rent, newish clothes for their kids, you
| should probably eat a vegetable once in awhile, .... People
| are living "paycheck to paycheck" in those more comfortable
| lifestyles, and going from $0 to $2000 in discretionary
| income is huge. That's a year of weekly date nights at
| someplace better than McDonald's, a year of monthly date
| nights at a pretty good steakhouse or other gourmet
| opportunity, kayaks and road-trip money for the whole family,
| a very nice clavinova and a few months of lessons, ....
|
| In either case, I suspect the key to understanding is to
| compare that $2k (really $2.2k-$3.3k in equivalent income
| depending on relevant tax details) to $0 rather than to total
| expenses.
| LordDragonfang wrote:
| In addition to what the other commentors have said, regularly
| going out to eat or have a drink or two adds up quick, and
| being unable to do that during the pandemic forced people to
| save all the money they would otherwise have spent on that.
| This left people with a bunch of cash to spend on other
| things.
| ska wrote:
| > feel they were "COVID rich" is something I just can't wrap
| my head around.
|
| I think that term ("Covid rich") isn't meant just for the
| checks, but for the general increase of disposable income.
|
| If you are low income, $2-3k in checks can effectively be a
| pretty big windfall as people note in this thread.
|
| If you were middle income, there was probably a bunch of
| discretionary spending on e.g. meals out, shows, vacations
| that you didn't spend compared to previous years. It's not
| hard to see that being an "extra" 5 figures for lots of
| families.
| mulmen wrote:
| How does $3,000.00 become five figures?
|
| Do you mean four or that four figures feels like five?
| ska wrote:
| >> ("Covid rich") isn't meant just for the checks, and
|
| >> ..., there was probably a bunch of discretionary
| spending on e.g. ...
|
| i.e. money in your bank account that in a "normal" year
| you would have spent already. On top of the checks.
| mulmen wrote:
| So a $3,000.00 check is part of a five figure increase in
| unallocated discretionary income?
| conductr wrote:
| For higher incomes, people spend a lot on travel, the
| inability to travel for a period during Covid meant tens of
| thousands of dollars of available budget for other things.
| This is what these people used to do all their home
| remodeling.
|
| On the lower end, assuming you were able to WFH the instant
| savings from not having to commute (gas, tolls, etc). Was a
| pretty big change to your budget.
|
| Other things like childcare can be a significant expense
| for many families and it's a huge change when kids were
| forced home and the expense was avoided. Some of these
| things came with reduced household incomes, layoffs, etc
| for other households. But if you were able keep your income
| and just reap the savings then you benefit. At first,
| before inflation kicked in, but since then if you're income
| hasn't increased ~30% or more since 2019 (very dependent on
| your locale) then you've probably been digging a hole the
| past ~2 years, unless you are a great with budgeting and
| cut back in real time as prices increased. My feeling is
| it's been had to do for many people as most people don't
| budget and I know for many income hasn't grown enough to
| keep pace with inflation.
|
| I'm pretty pessimistic about Covid economics/politics. My
| opinion is it should have triggered a global recession,
| likely worse than the financial crisis. There's still a ton
| of inflation that needs to flush through the financial
| system. While we talked about flattening the curve of the
| virus, we really just flattened the curve of the economic
| fallout of such a large event. I think a period of
| austerity is likely going to be required. Rates and prices
| have a lot of people locked in their houses or out of home
| ownership, average vehicle age is at a record high, people
| are dining out less, even cutting back on their beloved
| Starbucks, etc so I think the signs of this are ramping up.
| I'm not quite sure how it plays out, especially with the US
| political leadership changes coming up; but I feel like the
| majority of Americans (at least) have some financial
| strains coming their way, likely uncomfortable changes will
| need to be made and will feel like a type of austerity to
| us.
| JohnMakin wrote:
| I struggle adjusting my tone when responding to comments like
| this, so just know any snarkiness is purely accidental and
| colored by many years living in an extremely high cost of
| living area at a joke of a minimum wage.
|
| Living paycheck to paycheck, truly, and I mean truly in that
| sense where you need to wait for checks to clear before
| buying groceries occasionally - is extremely common. When you
| live like this long enough, "big" costs start adding up. That
| funny sound in your car that you can't afford to get fixed
| gets worse. Your tooth hurts super bad, but can I afford a
| $1000 dentist bill? I'll just hope it doesn't get worse.
| Maybe your kid gets really sick, forcing you to take time off
| you cannot afford to (not everyone is salaried or has
| vacation/PTO policies), adding to the strain. You go to
| credit cards to stretch things out, but of course that has a
| limit to how far it can go, especially when you're barely
| treading water. Eventually you _will_ drown, something has to
| break. What it is varies and will probably largely determine
| the long-term outcome of the situation.
|
| Anyway, all this to say, there have been many times in my
| life where these nagging, lingering problems that caused
| significant strain and hardship in my life that I simply
| could not afford to fix would have been solved immediately
| with a few thousand dollars, or whatever "trivial" amount you
| want to put as a value here. $2000 can actually be a lot more
| than that when you consider interest and paying down a credit
| card debt. I can think of one very specific time in my life
| where $500 being loaned to me was the difference between
| where I am now and being out on the street, and that is not
| an exaggeration whatsoever.
|
| The reason you cannot wrap your mind around it, and why this
| bothers me, is that comments like this come from people that
| truly cannot imagine how massive swaths of the united states,
| and more broadly live day to day - it comes from a position
| of enormous privilege, even if you may not
| realize/acknowledge it. To _me_ , I struggle to imagine how
| this comment I am responding to can be made at all, but I
| know our life experiences probably differ in a drastic way.
| JohnMakin wrote:
| As a more personal note, and without responding to some
| other victim-blamy comments in the larger thread that kind
| of irritate me, the _only_ way I got out of my situation
| was a big (to me, a similar amount as being discussed in
| this thread) financial gambling windfall that led me to
| being able to purchase a cheap vehicle and expand the hours
| I was able to work due to having semi-reliable (it was a
| cheap ford piece of crap that constantly broke, but it was
| something) vehicle. From there I was able to enroll in
| community college, which luckily was free-ish for the
| income I was at, which is way too low of a threshold. I
| could not qualify for any kind of government aid whatsoever
| despite living in "welfare state" CA because at $15,032 a
| year I was well, well over the limit of what qualified you
| for food stamp assistance or anything like that. Pre-ACA
| healthcare was completely out of the question and I amassed
| $200,000 in medical debt that sidelined me for many years
| before it fell off my credit report.
|
| I am very lucky in that things panned out (relatively, I
| still deal with residual issues due to living that way for
| as long as I did, about 15 years) and I was somehow able to
| finish school due to traits I believe not many people are
| lucky enough to have. I don't believe at all that many
| people in this situation are there of their own fault, and
| I'd die on that hill, but I can only provide my own brief
| story and some really basic cost of living statistics that
| are very easy to look up. It's bleak out there.
| naming_the_user wrote:
| A lot of people are just financially illiterate. I grew up
| poor and the other comments here are super foreign to me. I
| agree that a couple of grand would be useful but not for
| buying toys, mostly for fixing stuff.
|
| Especially the idea that money just disappears so spend it
| whilst you have it. That's like saying your legs might
| disappear so cut them off now to avoid the surprise.
| alistairSH wrote:
| Opposite experience here. We spent a ton LESS during COVID. No
| stimulus for us, but lots of cancelled travel. Did some light
| home reno, but nowhere near enough to offset reduced spending
| on travel, dining out, and other entertainment.
| reaperducer wrote:
| _Cut to a few years later and the cost of things has risen
| faster than my income and my brain is still "COVID rich", I can
| see why credit card balances are higher and defaults are more
| common._
|
| Add to it the rise of buy-now-pay-later schemes like Klarna and
| Affirm, which for a long time would allow you to make your
| payments with a credit card, allowing people to run up more
| debt faster than ever before.
|
| It's my understanding+ that making payments with a credit card
| is no longer permitted, so now these companies are pulling cash
| out of already over-extended people's checking accounts,
| keeping them from paying their credit cards.
|
| Fintech wins. Traditional credit cards lose. Human beings lose
| harder.
|
| + I have never used any of these services, but I know people
| who have, and it all sounds like loan sharking to me.
| whaleofatw2022 wrote:
| Klarna/affirm do often seem to be the thing I see 'not
| financially stable' folks use.
|
| Most recent example being someone considered an 'adult child'
| of the state and on SSDI that used Affirm to pay for some
| xmas presents.
|
| > It's my understanding+ that making payments with a credit
| card is no longer permitted,
|
| Ive never used them myself either but it would surprise me if
| they allowed credit cards for payment ever.
|
| In my head they were trying to make their money back on the
| loan via the merchant rate 'padding' (i.e. usually 1-2% of
| the item price).
|
| Which of course, in this non NZIRP/ZIRP climate means they
| have to find other ways of making/saving money... (didn't
| klarna just do a layoff?)
| blueelephanttea wrote:
| This entire article seems to be completely based on a non-
| inflation adjusted write-off value. It is not surprising to me
| that we are setting write-off records. We were bound to at some
| point!
|
| It is clear that delinquencies have ticketed up over the last
| year or two. But this article does not do a particularly good job
| about contextualizing if this is actually concerning.
|
| Here is the actual rate:
|
| https://fred.stlouisfed.org/series/CORCCT100S
|
| Pretty tough to look at that and determine if this clearly
| concerning or an moderate adjustment to a changing post-covid
| environment.
| pests wrote:
| I'm having trouble getting thinking this through. If the rate
| was inflation adjusted, would it appear better or worse?
| blueelephanttea wrote:
| It would appear better. The absolute value of written off
| loans will perpetually increase since the total amount in
| loans will increase.
|
| The record 2010 number is ~$80 billion in 2024 dollars vs $46
| billion this year.
| paxys wrote:
| _XYZ metric is at its highest ever!_
|
| Is it adjusted for inflation and the rise in population in that
| period? (hint: it isn't)
|
| 10 seconds of simple math usually takes the steam out of the vast
| majority of such sensationalized headlines.
| piva00 wrote:
| You're correct about the figure not being adjusted for
| inflation but the metric on the rise compared to last year is
| concerning:
|
| > Credit card lenders wrote off $46bn in seriously delinquent
| loan balances in the first nine months of 2024, _up 50 per cent
| from the same period in the year prior_ and the highest level
| in 14 years
| bbatsell wrote:
| That is not an independent variable. For example, lenders
| could have decided that the market in 2023 was on the way up
| and not writing off as much debt would allow them to collect
| more delinquent accounts in the future. In 2024, they think
| that anyone who would have been able to pay them has done so,
| so they wrote off the defaults they postponed from 2023 and
| also increased the speed of their write offs because their
| predictions about the economy changed. While it tells you
| something, it's certainly not an accurate measure of spending
| habits or ability to pay.
| sosodev wrote:
| A lot of those metrics are percentages which are always
| adjusted for population.
| davidclark wrote:
| > Credit card delinquency rates, which are seen as a precursor to
| write-offs, peaked in July, according to data from Moody's, but
| have only fallen slightly and remain nearly a percentage point
| higher than they were on average in the year before the pandemic.
|
| This is a prime example of a style of reporting that really
| grinds my gears.
|
| The citation is clearly to another internet source, so a link
| should be provided. If it truly cannot be linked because it is
| private, more context is still needed to understand what this
| data means.
|
| I actually can't find the source myself, but I can find
| "Delinquency Rate on Credit Card Loans, All Commercial Banks"
| from the Federal Reserve. [1]
|
| The percents from that source somewhat match those referenced in
| the FT quote. "Peaked in July"
|
| - 2024Q1 3.15%
|
| - 2024Q2 3.24%
|
| - 2024Q3 3.23%
|
| Using 2019 as "the year before the pandemic", the average was
| 2.5825. Is +0.6475 "nearly a percentage point"? I guess it
| technically would round up.
|
| Seemingly important context that the quote doesn't give is that
| 3.23% is lower than _any_ time 1991Q3 to 2011Q4. But, maybe the
| trend matters more for this metric.
|
| [1] https://fred.stlouisfed.org/series/DRCCLACBS
| pessimizer wrote:
| > Using 2019 as "the year before the pandemic", the average was
| 2.5825. Is +0.6475 "nearly a percentage point"? I guess it
| technically would round up.
|
| They're clearly not giving their references, calculations, or
| any basis for comparison, which is awful.
|
| But there's no need to minimize what you've found in _your own_
| research, which is that that defaults are up [?]25%.
| conductr wrote:
| > which is that that defaults are up [?]25%.
|
| Thanks! I feel like this is actually the next reporting step
| that the source article needed to do. The original data
| source citation is helpful of course too.
|
| But my feel is the FT author is trying to avoid just listing
| the numbers, so tries to cleverly explain them and
| unintentionally creates a meaningless statement. Instead,
| they should exercise a tiny bit of analysis and tell us on a
| relative basis the metric has changed since the premise is
| that it's changed a lot, how does "higher level" even compare
| to what the readers can relate to or comparing to another
| time they where high or the previous record holder. In any
| case, if I read it's 25% higher than 2019 I immediately can
| see how that would be concerning and drastic change and makes
| me want to read more.
|
| The cynical part of me thinks it's possibly just a way to
| increase word count and write with less numbers. But this is
| one of those cases when the author should use the data to
| create information for their audience to consume instead of
| describing the raw data (raw data nearly never needs
| description, if you're tempted to do that, just cite/recite
| it directly). In short, information > raw data > convoluted
| descriptions of raw data.
| davidclark wrote:
| Yep! And, since I provided the basis for my commentary, you
| don't have to trust my interpretation.
|
| My focus was critiquing their phrasing, which turns that 25%
| into 38%.
|
| Like I said, I'm not actually an expert on this to know if
| the trend is what matters.
| webninja wrote:
| Comments like yours make the comment section invaluable.
| Upvoted.
| mhh__ wrote:
| A lot of this data is quite hard to find if you don't have
| access to a data provider like Bloomberg (and costs money to
| quote) so I can understand why they don't bother, even though
| they should obviously.
| infecto wrote:
| All of this data is public and well known for anyone in the
| finance industry, both professionals and reporters.
| bdangubic wrote:
| you should follow a statement like this with some links
| mate :)
| infecto wrote:
| Not your mate but the OP already posted links to Fred
| which is where it's public. I am sure moodys used some
| internal data but Fred delinquency and late rates should
| get pretty darn close. This data (credit card related) is
| not unique but I can see it's not entirely obvious for
| folks like yourself that are not familiar with it. ;)
| patmorgan23 wrote:
| Cool. For those who are not in the finance industry, could
| you provide us some links to this easily accessible data?
| davidclark wrote:
| Moody's report could be aggregating the Fed data, but we'll
| never know without a real citation.
| listenallyall wrote:
| Why did you skip over the meat of the article in the second
| paragraph (and a graph) to complain about something in the
| 14th?
|
| _Credit card lenders wrote off $46bn in seriously delinquent
| loan balances in the first nine months of 2024, up 50 per cent
| from the same period in the year prior and the highest level in
| 14 years, according to industry data collated by BankRegData._
|
| > The citation is clearly to another internet source
|
| How is "data from Moody's" (likely internal, unreleased, or
| subscriber-only) clearly an internet source?
| davidclark wrote:
| Do you think the reporter at FT accessed this information on
| a paper report which was mailed to them?
|
| If not, then it is on the internet somewhere. Whether it is
| on the "public" or "free" internet is different. If it is not
| freely available, then they could still give a real citation,
| so someone else with access to Moody's private data could
| find it.
| lazyasciiart wrote:
| Email is not "an internet source", and neither is my
| corporate sharepoint site.
| davidclark wrote:
| "based on communications with Moody's analysts"
|
| "based on internal data from Moody's"
|
| "data from Moody's" with no qualifier indicates the
| reader should be able to reasonably find the information
| themselves (which they can't in this case)
| 1123581321 wrote:
| It's likely a mix of private service access, emailed
| reports, calls and chats if the reporter typically covers
| this beat.
| listenallyall wrote:
| Journalists (good ones) have sources. Perhaps he was
| provided the delinquency information via a phone call, or
| text, or at an invite-only presentation. It might be
| something Moody's will release publicly tomorrow, or next
| week/month, but this reporter got an early preview. There's
| a million reasons it wouldn't necessarily be on the
| internet right now.
| Waterluvian wrote:
| For-profit media is _not_ journalism.
|
| It kind of used to be. There was a level of responsibility
| despite the organizations being for-profit. But I just cannot
| pretend this is sufficiently true anymore.
| kasey_junk wrote:
| What do you suppose journalism is and when do you propose
| that happened historically?
| Waterluvian wrote:
| Stuff like Carreyrou's investigation on Theranos feels like
| journalism. Where the objective is the truth, not ad
| impressions.
|
| I think both goals can sometimes find harmony and the
| revenue can support the journalistic endeavour. But that
| feels less and less true. A lot of for-profit media is
| optimizing heavily towards clicks, often at the very clear
| expense of the story. Such as not linking citations because
| thou shalt not guide eyeballs away from the website.
|
| I feel that journalism has immense social value (I'd call
| it an absolute necessity) and ideally it is funded publicly
| and uses the academic tenure style approach.
| kasey_junk wrote:
| I think you have a biased belief in the history of
| journalism. The news now is not in any way more optimized
| for selling content than the past commercial media.
|
| And the history of state run media is not particularly
| aligned with the idea that "the truth" was the goal.
| ghaff wrote:
| And Carreyou worked for the Wall Street Journal and, as I
| recall, left because he wasn't allowed to be paid for
| speaking. Public funding has its own set of conflicts;
| look at any history of public television/radio funding.
| bee_rider wrote:
| By for-profit do you mean ad supported or something?
|
| I don't really see any reason why journalism shouldn't be
| for-profit. For example, a business model of producing
| informative articles and then selling access to those
| articles could be completely ethical, and a reasonable way to
| do journalism.
|
| Ad supported media is just a toxic business model though.
| ryanackley wrote:
| Hasn't ad supported media been the model for like 100 years
| or longer? The retail cost of print newspapers was to cover
| the cost of delivery and pay the retailers.
| bee_rider wrote:
| I think there's always been a mix? Anyway I'm, yeah, we
| didn't invent being unethical at the turn of the
| millennium or anything like that.
| hammock wrote:
| Here is another FRED chart that may be instructive, although I
| am not clear on the difference between "delinquency rate" and
| "balances past due" ("accounts past due" is different still)
|
| https://fred.stlouisfed.org/series/RCCCBBALDPD30P
| nimbius wrote:
| Past due < 30 days
|
| Delinquent > 30 days
|
| Generally delinquent increase of any percentage is a big red
| flag as these accounts are statistically very unlikely to
| make a correction and are a bellwether for greater issues
| like sustainable future consumer trends. They also betray the
| _real_ unemployment rate including the us "jobless" hand
| wavery.
| larrydag wrote:
| Here is the NY Fed household data statistics on the subject. The
| NY Fed reports quarterly on US credit and debt. Aggregate
| delinquency rates going up.
|
| https://www.newyorkfed.org/microeconomics/hhdc/background.ht...
| 2OEH8eoCRo0 wrote:
| The election is over, we stop pretending that the market is doing
| bad.
| bee_rider wrote:
| The whole credit system is a big scam anyway, hopefully people
| will keep defaulting and eventually take it out.
| Etheryte wrote:
| While I get your sentiment, let's not forget that behind every
| default, there's a life that's struggling to keep it together.
| This is not people sticking it to the man, it's people who have
| lost their jobs, been hit with a medical bill, or etc then
| going on to lose their car and their home.
| bee_rider wrote:
| That's true, and fair. I was glib due to my annoyance with
| the system, but of course it is structured to also hurt real
| people.
| michaelteter wrote:
| I don't know if the article references credit card interest
| rates, but I think it's worth also including in the discussion.
|
| The graph on this page illustrates how consumer credit card
| interest rates have skyrocketed, and how obscenely high it is
| relative to the Prime rate.
| https://wallethub.com/edu/cc/historical-credit-card-interest...
|
| I seem to recall that some years back the credit card interest
| rates were capped at a much lower rate than they are now.
|
| Where this would lead us shouldn't be a surprise to anyone. And
| at a general level, many current systems in the US are on a
| clearly unsustainable trajectory. However this collapses, it's
| going to be really messy.
___________________________________________________________________
(page generated 2024-12-30 23:00 UTC)