Credit cards are the next issue.
When Americans start defaulting the credit crisis will only get worse.
Let’s say Mary Jane has a $10,000 credit card balance. She does not pay the principle every month; instead, she pays the 28% interest charge. Credit card companies log the 28% gain on the $10,000 outstanding, which looks quite impressive. However, when they realize they will never get the $10,000 principle back… a loss will be recorded. The $10,000 is an unsecured, or uncollateralized loan - the company can’t touch her car or any of her possessions. In contrast, a mortgage is collateralized - banks can seize your house.
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