Economists debating cause for drop in credit card debt
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While conventional wisdom stated that national credit card debt has declined as a result of more frugal spending by consumers, some economists believe that the high number of charge offs seen in recent months is the real cause. The New York Times reported that lenders have written off billions of dollars worth of bad accounts that they now believe is irretrievable. The national total for credit card debt has declined from $915 million to $832.2 million in the last year, the latest Federal Reserve Board statistics showed.
"There is a lot of debate going on right now among economists" Cristian deRitis, the director of credit analytics with Moody's, told the paper. "Is there truly deleveraging or are charge offs removing a lot of balances?"
Charge offs have been a major problem for consumers, who will often find their credit rating so badly damaged by their financial troubles that they are locked out of the credit system entirely.
