One of the positive things about the recession, we’ve been told, is that many people are working to get their finances back on track. Evidence for this has been the fact that revolving credit debt has been declining. It appears, at first glance, that our society is working to reduce credit card debt.
But are things really as good as they seem? Maybe not. I received something from CardHub.com, breaking down some of the numbers. Here is what CardHub.com reports about the reduction in consumer credit card debt:
It’s been the general assumption that the cause of the decline in revolving debt was a new kind of consumer; one focused paying off his/her credit card debt and equipped with the means to do so. However, the key finding of the CardHub.com study was that 83 billion of the 93 billion decrease in credit card debt from 2008 to 2009 was attributable to bad debt being written off the books. …
In Q4 of 2009 outstanding credit card debt went up by almost $21.5 Billion, when the $21 billion write-off is considered.
So, really, it’s not so much that people are paying down their credit card debt as they are allowing it to default. At least, according to one survey.
This interpretation of events, though, shows just how easy it is to play with numbers. Far from being solid and unassailable, statistics can be interpreted to mean a number of different things. I am inclined, though, to agree with the CardHub view of things. It doesn’t seem that remarkable that in a world where “strategic default” on homes is becoming more common, the same practice would apply to credit card debt.
And, of course, it shows just how personal finances really are. You can’t make your decisions based on what others are doing; you need to make your financial decisions based on what is best for your situation.