Now important to take your credit card usage very seriously and I say this in term usage because when I tell people I have s hobby of not picking cards, they look at me as if I’ve gone crazy and have a problem.
But I’ll tell you my only problem is that the chase sapphire really increased their annual fee to a 550 a year and now it no longer make sense to keep compound with the HP Morgan reserve, so those are the problems that I deal with, but today we’re being informed that new data was just released and found that 15 million Americans have skipped their cards payment and that I represent percent more common and now represents 3% of all credit cards users.
Anyway, let’s discuss exactly what’s going on, what this means for the future of all card users and how it you’re reading this. Not to mention this could be a very severe sign of what’s to come because if the tend continues we could be in for very rough times ahead, so. Let’s go further down this card rabbit hole.
First let’s go over the basic and cover some of these headlines we got about millions of Americans slipping their card payment and this represent users who delve financial hardship which allows them to temporarily deter their payment interest fee for a specific period of time, this is also during a time where almost half of America is in card debt.
With almost 1/4th of these people adding to their credit card balance as a death resist to the illness, and even more than that 40% of the people can’t afford to make more than the minimum of the payment and this is if my own generation had this.
So all the fellow millennials our there because one out of every 3 of us recently had to increase the credit card Debt out of necessarily and the cherry on top of this Is that we now have articles coming out taking about how consumer debt hits it’s all time high now surpassing 14 trillion dollars but how severe is all of this.
What does it mean for you people really and how do you know whether or not you’re going to end up in another depression or OT really isn’t that big of a deal just blowing it out of proportion again. Like most of all this news alike headlines, but as it is right now the outstanding credit card debt is not looking as good, by the end of 2019, American have accumulated roughly 30 billion dollars of the credit card debt and that’s works out to be an average debt of 5,700 per person and just as you would expect when you go and break this down further, it was found that the people who had the lowest household networth are the one’s with the highest credit card debt.
This is mostly because they love no other option other than to use the credit to pay for the essential and because credit card interest rates would be ridiculously high, it makes it extremely difficult to pay off, if you can’t afford to make more than a monthly minimum payment which like I mentioned earlier represents 40% of all credit card users.
Now on the surface you might think that credit card companies must love this, the more debt the people pule on their credit cards the more credit companies make and if you think that you’re bkt entirely wrong, but credit card companies just make money though interest payments, instead they make their money through different ways.
So the First credit card make their memory though what’s know as an interchange fees, this happens every single time you use or swipe your credit card and when you do that the credit card company collects a small 2.7% processing fee for the merchant, so even if you never pay interest and you always pay off your balance in full, credit card companies are still making money and as you can see from American’s express they make more money from processing fees that thru so from interest and many other companies do generate about 10 to 20% of their total revenue from this as well.
Now the second as we’ve just talked about, they do make money from interest payments obviously the credit charge you 27% interest that money is going straight into their pocket, I’m about to slow you owing a credit card company could be extremely overdrive, American Express made 3.2 billion dollars from interest payments, now of course it’s important to mention with this that not all of their interest income come as profile because there’s a portion of people out there who just charge up a credit card and then never pay it off in default, so crossing the street, it’s estimated that 10% of the credit card users end up doing this leaving then with about 90% profit margin on interest.
And that is fees: this could include the annual fee you pay on s lot of the rewards cards out there, it might be a late fee or a balance transfer fee or a clash advanced fee, so given all of that for the credit card consumer things are not looking so good and with the 5.7k annual balance and the average of a 20% interest rates that means that people on average are spending a 100% a month on interest payments.