What the Media Is Not Telling You About the Credit Card Boom
The credit card boom is alive and well. Credit card companies are handing credit out again like candy. It might as well be 10 years ago post financial crisis.
The media is making it out like this is a good thing. They refer to it as a credit boom. They talk about how credit card companies are liberally accepting applications and handing out credit. They talk about how defaults are the lowest in history. Credit card companies are competing for your business by giving out all types of perks. It is a great time to get credit!
Not so fast!! How about what they aren’t telling you?
Hidden Fact #1 Credit card Debt should hit a record in 2016
Credit card debt is set to top the July 2008 record of over a trillion dollars. It will be the first time that credit card debt, car loan debt, and student loan debt are all 1 trillion plus. That is not a good sign. That is a sign of unsustainability and the sign of debt bubble 2.0.
Hidden Fact #2 The Next Recession Could produce massive defaults
People are leveraged to the hilt! Economic cycles still exist and suggest that a recession is in our future. However, this time around we would be entering a recession where the Fed has no solutions. For those who are heavily in debt, it will be challenging.
Hidden Fact #3 Terms and Conditions will change
Just like the financial crisis, the credit card companies will change the terms and conditions on your credit cards when things get dicey. They will make sure the tough times benefit them at your expense.
Hidden Fact #4 Banks will struggle
The credit card business is a big revenue center for the banks. The interest rates on other loans are way too low. Banks make good profit from charging excessively high interest rates on credit card debt. If and when we get into rising defaults, these profit centers will start to go away.
Hidden Fact #5 Those Perks have fine print
The media is acting like you can get a good deal with perks as credit card companies compete for your business. As I have always written, credit card companies aren’t in the business to give you a good deal. Just check the fine print for the truth on that one.
Hidden Fact #6 Interest rates are much higher on average
With this credit card boom, consumers are paying much higher interest rates. Of course, this is what is sparking the boom in credit. Banks are ripping off even the consumers with good credit. Available credit at high interest rates is not a good deal.
This credit card boom is not a good thing as the media wants you to believe. People should be getting rid of debt instead of adding to it. It is sad that we are only about 8 years removed from the financial crisis and it appears very few have learned any lessons about debt. When the credit card companies greedy, it is a sign of things to come!