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Write offs account for much of credit card reduction, while debt consolidation may help avoid a default
By Oscar Monfort on Jul 11th, 2010
Sure it seems as though consumers have been getting their arms wrapped around their credit card debt, especially when looking at recent figures.
After all, the Federal Reserve Board has reported that the amount of credit card debt dropped 9 percent during the first three months of the year. However, the Wall Street Journal noted that much of this decline was accounted for by charge offs.
"The biggest reason credit card balances are declining isn't that people are paying them off with their spare cash and extra earnings," the Journal said. "It's because the banks have been writing them off as the borrowers default."
Referring to numbers from the Federal Deposit Insurance Corp., $18.7 billion in credit card debt was written off by companies, which amounts to roughly 96 percent of the drop seen in the first quarter.
Consumers who are facing a situation that could lead to defaulting on their credit cards may consider options to try and better their financial position. One thing they might do is look at debt consolidation, which can help pay bills in a shorter amount of time.
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