Here It Comes- Credit Card Defaults Will Start “Rolling In”

The concept of “rolling debt” is something that most Americans are used to in the form of credit cards, since the debt “rolls” from month-to-month. While most can “roll” with the debt, if one is not careful, the debt can roll over a person and crush him financially. However, the Wall Street Journal reports this is what is about to happen to many Americans as the unemployment situation precipitated by COVID-19 is about cause a lot of credit card defaults.

Millions of Americans are skipping their credit-card payments as the coronavirus pandemic puts them out of work. Banks and other lenders that for years relied on heavy consumer spending to create big profits are preparing to struggle alongside their customers.

As the economy spirals, credit-card payments are one of the first places where the effects will show up. They are often the first loans people stop paying when money is tight. They are usually unsecured, which means lenders have little recourse if a borrower stops paying.

Many large card issuers, including Capital One, Discover Financial Services and Synchrony Financial, are letting borrowers pause their credit-card payments for a month or longer. Some are lowering or waiving late fees and interest charges, or even forgiving portions of customers’ balances.

Those suspensions will allow some borrowers to stay afloat, but only temporarily. Companies and analysts expect delinquencies and charge-offs to soar later this year. Banks and other lenders can only shoulder the unpaid loans for so long before they face a reckoning too. (source)

This is just the beginning of the debt crisis. It is going to destroy the credit of many Americans and worsen the already dire financial situation.

Keep an eye on this because this could lead to exposing the housing, auto, and student loan debts that when revealed will crush the economy, or what is rather left of it.

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