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Fears Grow Of A Global Plastic Meltdown

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http://business.timesonline.co.uk/tol/busi...icle4322121.ece

More than $1 trillion (£500 billion) is held on credit cards in America. In the UK, debts of more than £50 billion have been run up on the plastic. Across the world, somewhere between $2 trillion and $3 trillion is owed on credit cards.

Up to now, the credit crisis has passed by without plastic going into meltdown. Statistics have shown steady levels of arrears, and suggested that many consumers have been successfully paying off part of their balances.

Now there are increasing signs that this last breakwater, shoring up the economies of the western world, is about to crack under ever-increasing strains.

“Credit cards are definitely going to be one of the next big problems,” said Steve Nuttall, head of the financial-services research group at polling company YouGov. “Our research shows that everything started to fall off a cliff in about March or April and that should begin to show up in bad-debt charges by the end of the year.”

YouGov’s research suggests that 15% of the British public is now behind on at least one bill of some kind or another. Of those in trouble, 38% say they are behind with utility bills or council tax, while 31% cite credit cards as their big problem.

Problems in credit-card debts have the potential to send a new wave of panic through global financial markets.

Credit-card debts were packaged up and sold on by banks during the boom years, just like mortgages, car loans and the multiple billions of debt used to fund large private-equity deals.

For the banks, it was a cheaper way to lend money to consumers at competitive interest rates.

The debts owed on thousands of credit cards were swept together and placed into a large bond, off the bank’s balance sheet. The pool of credit cards was then cut into slices, based on the likelihood that the credit-card company would get its money back.

Other banks bought the best slices, which represented the money the credit-card company expected to be paid back, no matter what. The riskiest slices, which would be hit first if customers started missing their debt repayments, were sold to racy hedge funds.

I never really understood how the Credit crunch could be so severe and yet people were still receiving countless new offers for credit cards. It did not make sense until I read this article. They were doing the same as they did with mortgages except they still had/have buyers for this type of debt. I get the feeling this could be the point when the crunch truly hits home when this one goes bust.

Amazing they have not reigned in on this one given that this type of financial model was proven to be broken in the mortgage market, but hey the banks are all about selling these things on and making money, it is up to the buyers to says no and call an end.

Incredible!

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People borrow long term on credit cards?!? The interest rates make that an insane choice for anything more than the odd unexpected one-off expense you can pay off in a month or 2 - anything else a personal loan is always a better bet. I don't know a single person who borrows on a credit card, and I know some pretty dumb people.

Only reason to have a credit card is for the cashback offers and discounts. 20% tax payers can also make some money stoozing.

Edited by impatient_mug

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I'll bet there are plenty of stoozers who have 'forgotten' to ensure they can pay of the balance at the end of the interest free period, hoping just to transfer the balance onto another 0% card for a 2.98% fee.

I'll also bet that there won't be many 0% offers when the current tranche runs out.

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Well if the entire nation of credit card holders default on credit card it will be no body to suck up to pay for those that do not pay, but the elite.

Maybe, maybe we should stop paying taxes altogether and see what our corrupted corporate government even at the state level is going to do :lol:

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Well if the entire nation of credit card holders default on credit card it will be no body to suck up to pay for those that do not pay, but the elite.

Maybe, maybe we should stop paying taxes altogether and see what our corrupted corporate government even at the state level is going to do :lol:

The credit card etc... will the the final blow, the whole financial system will collapse, credit cards will no longer be easy. the money system can't cope. Anyway i being pointing this out, teh system is running out of time.

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People borrow long term on credit cards?!? The interest rates make that an insane choice for anything more than the odd unexpected one-off expense you can pay off in a month or 2 - anything else a personal loan is always a better bet. I don't know a single person who borrows on a credit card, and I know some pretty dumb people.

Only reason to have a credit card is for the cashback offers and discounts. 20% tax payers can also make some money stoozing.

Trust me, there are plenty of "accidental" long-term credit card borrowers, many of the pretty young. I say "accidental", because it's not long term borrowing in sense of, for example, buying a car on a credit card then not refinancing the debt some other way, but in the sense of slowly accumulating - a tank of petrol here, a latte there - a balance that would actually take some serious effort to pay off. Okay, as it stands, I don't know of anyone who's definately in that position at the moment, but I can certain think of a few who've done it in the past, MEWing to pay it off in more than one case.

The danger of the current situation is whilst in the past that potentially long term credit card borrowing could be converted into something else with relative ease, with other lines of credit drying up fast, we're going to see (I suspect) a fair few people left holding a credit card debt over a much longer term than planned... with all the grubbiness that entails.

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An awful lot of them will be playing the credit card game. You borrow on one card and use it to pay of the next. Then you borrow on that to pay of the next in a circular. You can amass huge debts this way without anyone knowing.

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Trust me, there are plenty of "accidental" long-term credit card borrowers, many of the pretty young. I say "accidental", because it's not long term borrowing in sense of, for example, buying a car on a credit card then not refinancing the debt some other way, but in the sense of slowly accumulating - a tank of petrol here, a latte there - a balance that would actually take some serious effort to pay off. Okay, as it stands, I don't know of anyone who's definately in that position at the moment, but I can certain think of a few who've done it in the past, MEWing to pay it off in more than one case.

The danger of the current situation is whilst in the past that potentially long term credit card borrowing could be converted into something else with relative ease, with other lines of credit drying up fast, we're going to see (I suspect) a fair few people left holding a credit card debt over a much longer term than planned... with all the grubbiness that entails.

It will be total meltdown. Many of these people never intended to pay off their debt anytime soon. Now that they are forced to face the reality of their situation, they will just declare themselves bankrupt or be forced into the same by their creditors. Either way, it is the rest of us who will suffer!

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People borrow long term on credit cards?!? The interest rates make that an insane choice for anything more than the odd unexpected one-off expense you can pay off in a month or 2 - anything else a personal loan is always a better bet. I don't know a single person who borrows on a credit card, and I know some pretty dumb people.

Only reason to have a credit card is for the cashback offers and discounts. 20% tax payers can also make some money stoozing.

Long story short but I ran up some debts a few years ago, I was a DTR (Divorced to Rent). Anyway it worked out a lot cheaper to move it from credit card to credit card, paying the 3% transfer fee and then get 12 months at 0%pa, then to take out a personal loan. I imagine a lot of others are doing this ATM, so if credit cards dry up, paying the 18% pa interest would be a financial disaster for a lot of people. Luckily those days are behind me now.

Good find by the OP, I've been confused for a while by the constant stream of credit card offers coming through the front door when we're supposed to be in the middle of a credit crunch.

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An awful lot of them will be playing the credit card game. You borrow on one card and use it to pay of the next. Then you borrow on that to pay of the next in a circular. You can amass huge debts this way without anyone knowing.

Yep, and when that deal runs out and you are maxed out, you remortgage and start again. Ooops, forgot, can't do that anymore!

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Good find by the OP, I've been confused for a while by the constant stream of credit card offers coming through the front door when we're supposed to be in the middle of a credit crunch.

I was getting these too, still am, loan offer after loan offer, even from banks I have fairly significant savings with.

I have an old barclaycard I never use but keep like one of those dusty old medicine boxes, "just in case". One day, out of the blue, they sent me a new pin along with a big advert to start using my card again. I was really p$$$ed off by this, sending a pin through the mail is a security risk, especially if I'm not expecting to get it. To do it under the pretence to try and nudge me into spending on my card was disgraceful. It smells of desperation to me.

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I was getting these too, still am, loan offer after loan offer, even from banks I have fairly significant savings with.

I have an old barclaycard I never use but keep like one of those dusty old medicine boxes, "just in case". One day, out of the blue, they sent me a new pin along with a big advert to start using my card again. I was really p$$$ed off by this, sending a pin through the mail is a security risk, especially if I'm not expecting to get it. To do it under the pretence to try and nudge me into spending on my card was disgraceful. It smells of desperation to me.

Ah, if only your sensible attitude had been shared by the majority of the population over the last ten years, we would not be in the total doo doo, that we are now! I salute you...

However, I am a bit worried that you are not really connected to the real world, most peolple get at least twenty of these letters per month, they are not the devil in disguise, honest!

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Anybody know where the bonds that are created from credit card debt are listed so we can monitor what is happening to the market? Have the impressive falls seen in the mortgage debt markets started to appear in the credit card derivatives markets? I guess it makes sense that the mortgage bonds would go first followed by credit cards? People have used the MEW to pay off credit card debt?

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However, I am a bit worried that you are not really connected to the real world, most peolple get at least twenty of these letters per month, they are not the devil in disguise, honest!

They send you your pin twenty times a month? :blink:

ps as for being connected to the real world, hell no, as little as possible.

Edited by Fraccy

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I was getting these too, still am, loan offer after loan offer, even from banks I have fairly significant savings with.

I have an old barclaycard I never use but keep like one of those dusty old medicine boxes, "just in case". One day, out of the blue, they sent me a new pin along with a big advert to start using my card again. I was really p$$$ed off by this, sending a pin through the mail is a security risk, especially if I'm not expecting to get it. To do it under the pretence to try and nudge me into spending on my card was disgraceful. It smells of desperation to me.

I too have a Barclaycard and received the pin that I use so little I can never remember. Credit cards are and can be very useful, in the same way as responsible mortgage lending. Sadly these product have been abused to the point of complete meltdown.

Very sad!

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What used to really annoy me was the credit card cheques some bankls send out, usually accompanied with a letter almost begging me to use them. The charges, if you were stupid enough to use them, were huge. Virgin were the worst offender and kept sending them each month, even after I asked them not to.

They should print a financial health warning in large type on the front of each cheque, in a similar way to packets of fags.

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I used to recycle the junk mail & return it. That way First Direct got crappy letters offering them a credit card from MBNA (with a free biro if you sign up in 14 days - whoo hoo!) & so on.

It brought back memories of the late 80s - the more unsolicited offers you're getting to take on debt, the more you should save for the forthcoming crash.

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The UK’s debt-strapped consumers currently owe a staggering £56 billion on credit cards. According to figures from Apacs, the payments network that supports the British banking system, this could climb to £160 billion if those 31m cards are used to the max. The figure takes account of all the measures already taken by credit-card issuers to clamp down on borrowers by rejecting card applications and cutting credit limits.

With that £100 billion cash pile, Britain’s credit-card holders would have enough money to buy Barclays, HBOS, Lloyds TSB, Royal Bank of Scotland and get about £20 billion change. On one level, this provides reassurance as it suggests that consumers still have some spare capacity in their finances. If the economy is destined for a prolonged recession, however, it is simply storing up the problem.

We should insure ourselves and buy the banks?

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Weve (they, not me) have done 20 years spending in the last 10, this includes consumer goods, house prices, holidays and living high on the hog. Mew has almost finished, personal loans are on the way out and now credit cards looking dodgy, suspect we will now have 10 years of not spending to make up for it. This smells like depression and not the mild recession we should have had by 2001.

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Maybe, maybe we should stop paying taxes altogether and see what our corrupted corporate government even at the state level is going to do :lol:

Yes i would like to see that one too.

My guess is the police will be sent onto the streets to force people back to work and that will only make things worse for them so the next step would be to try and get the army to help and at that stage i think the army would expell the goverment and this too me is the first step forward in taking control of our own lives.

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Guest Winnie

Who is behind MBNA? They are the real crooks - behind every unsolicited maildrop and endorsement card imaginable.

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Who is behind MBNA? They are the real crooks - behind every unsolicited maildrop and endorsement card imaginable.

Agree. MBNA suck. I had a credit card through my union, issued by HBOS, which was only used for the occasional internet purchase etc. Now, I've always been very careful to tick boxes saying that I don't want any junk mail, and I never got any. The account got transfered to MBNA, suddenly I started receiving credit card cheques, offers for new credit cards, personal loans etc. about 2 a week. When I contacted MBNA they stopped everything for a while, then it has all started up again, apparently as a term in accepting a new credit limit, which I never asked for. It's stopped again now, thankfully.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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