When will the credit card bubble burst?

In case you didn’t know, there is another bubble growing massively in this country that is about to burst. Consumer revolving credit card debt continues to grow each month, eventually surpassing $900 billion for the first time this past June. The Federal Reserve reports that Americans racked up $39 billion in new credit card debt this year. We refer to the impending crisis as the credit card tsunami. You better close the hatches!

For the month of August 2007, US consumers added another $6.2 billion in new debt, on top of the $5.6 billion they amassed in July. In total, including everything but mortgages, Americans owe nearly $2.5 TRILLION! Now that the mortgage game is over and all that easy money has been made, the next big things the banks will be milking for maximum growth and profits are the cards. Fees and penalties have been steadily increasing for years, as have average interest rates. Last year, banks earned over $100 billion in interest and another $50 billion in fees and penalties; These guys are not your friends.

Pressured by the bursting housing bubble, many people are increasingly relying on their credit cards to make a living. With the faucet running dry on home equity and their lifestyles not changing, or circumstances like lost jobs or medical emergencies causing them to continue to rely on credit cards, there is no end to John Q’s additional debt. The public will take it on. Eventually the dam will burst and many people will drown.

Who knows how many people have been living beyond their means in recent years, siphoning the temporary wealth out of their properties only to spend it on luxuries like vacations and lavish weddings in Tuscany? How many people have transferred unsecured credit card debt to their homes only to risk foreclosure if they miss a few payments? How about the people who thought the value of an already overpriced home would continue to rise and took out teaser mortgages hoping to use the profits to refinance in a few years and are now stuck with a mortgage , which has doubled, and definitely not pay for it?

Now that the game is over, these folks are turning to their loading cards to survive. People who were “hooked” by teaser mortgages now find themselves unable to make the “real” mortgage payment. Many default on the mortgage and keep the credit cards current. Some use it like an ATM, pushing it to its limits and constantly applying for the flood of new cards that grace their mailboxes.

You’re living in fantasy land if you think that defaulting on your mortgage won’t hurt your credit. Give it a month or three, and when the credit cards see you defaulting on mortgage payments, they raise your interest rates to over 25% and then, excuse my French, you’re “fucked”. Most of your payment is wasted on interest and it can take 10-100 years to pay off the debt.

Card companies know that people will do anything to keep up with cards and people need cash. Requirements to get a credit card are at their lowest in 10 years, according to a Fed survey; If you have a pulse, you can get a credit card. They even give credit cards to pets.

The junk mail credit card requests that grace your mailbox are trucked to the post office on pallets and unloaded by forklifts. While the number of mailers is actually lower than it was at its peak in 2005, the percentage of people who respond to and are accepted by the credit card companies has steadily increased and has even tripled since 2005!

All of this is the result of closing equity out of your overpriced home. It was never sustainable, and I feel sorry for the people who bought at its peak and paid more than $600,000 for a 40-year-old house that wasn’t worth 1⁄4 of that price. Thinking that the bubble could keep getting bigger and that the median price of a home exceeded the average person’s ability to buy one was only a matter of time before something had to give way, and it has.

Now I talk all day to people who take cash advances from credit cards to live on or to pay their mortgages; this will end eventually.

Next, the credit card bubble will burst. When your credit card debt is spiraling out of control, you need to do something. Through the debt settlement process, there are opportunities to settle with creditors within 3-4 years with less than what you owe, giving you the ability to get new loans once the process is complete. Read our free debt settlement report to see if this is an option for you.