The credit card is an omnipresent financial tool used to support mass consumerism. Consumers in good times or bad use credit cards to make purchases. In the current economy, Americans are placing more purchases on their credit and debit cards which could lead to a steep price to pay in the future.
More and more Americans are racking up credit card debt as they use these instruments to make daily purchases. This alarming trend is a boon for credit card companies who issue the cards; they are flush with profits. However, consumer action could portend problems for them and the card companies in the future.
Short-term credit actions could become long-term problems for the anemic economy and the financially precarious banks that underwrite the risky debt. The US consumer has had their disposable income eradicated as they have to spend more on higher prices for gas and food.
Food and gas are not optional luxury items but necessities. Even budget minded Americans arent able to properly save and allocate financial resources. Many Americans cant perform a proper monthly budget, as gas and food prices keep escalating month to month. They are extending their budgets using credit.
Credit concerns have reached even the Federal Reserve, who is implementing new guidelines for credit companies. Recently, the Fed has been concerned about delinquencies hitting 4.86 percent and revolving credit debt rising by 7.9 percent to $957.2 billion in the first quarter of this year.
Unfortunately, as high-interest debt keeps accumulating, Americans will continue to slide deeper into debt. More debt consolidation, credit consolidation, debt counselors, and credit counseling services will be needed. These services are already aggressively sought out by consumers today; this will only increase over time.
Significant risk exists for people who are putting too much debt on credit cards thus further endangering their financial security. However, if the security of underwriting credit card debt is jeopardized, the economy will decline even further.
Currently, there is a credit crunch to which many financial institutions have already succumbed. Faced with rising foreclosures, loan delinquencies, and credit card debt, banks and other financial institutions have seen their profits evaporate; some are no longer in business.
Herein, financial institutional credit lenders across industries have limited their lending in order to lessen exposure to more risk. The credit crisis is a time bomb in the making, a crisis more severe than acknowledged by the government and the experts.