» a credit and personal finance blog

The latest estimate I saw for US credit card debt stood at $915 billion. I don't know exactly where it stands today, but the number seems to rise 10 billion or so every time I hear it mentioned. It may sound like a familiar number to you as well, since it's a mere $15 billion more than the amount of consumer debt that drove the subprime mortgage meltdown earlier this year.

Should you be concerned about this rise in US credit card debt? I think so. You would be crazy if you're not concerned. Especially if some of it is held by yours truly. As major credit issuers such as Citigroup and American Express report their worst quarterly earnings since 2001, many analysts fear that rising unemployment and subsequent credit card delinquencies will be catalysts for the next meltdown in global credit markets.

But is a credit card "crisis" really next in line? I'm not convinced quite yet. I can't deny there are similarities between the issues we're experiencing with credit cards and subprime mortgages; however, I see one major difference that leads me to believe things will not be as bad as many predict. It's a well-known fact that mortgage delinquencies were at all-time highs and dramatically increasing months before the subprime meltdown. On the other hand, credit card delinquencies are actually coming off unusally low levels. And according the American Bankers Association, credit card delinquencies increased just slightly to 4.54% during the second quarter this year. That was an increase of only 3 basis points compared to HELOC default rates that continue to see double digit increases quarter after quarter. So not only are we starting out in a much better place, but it's also clear that people are keenly aware of what we just experienced in the mortgage markets.

There's a heightened sense of awareness, and all signs indicate that many consumers are cutting back on spending, trying to save as much as they possibly can, and pay off more of their debt. Credit card default rates will likely continue to increase in the coming months, as they did in the third quarter, but I don't expect the fallout to be so severe that we will see substantial downgrades to securities backed by credit card receivables like we did with subprime mortgage-backed securities. So, the next important question is whether President-Elect Obama will be able to implement a stimulus package that will create more jobs and convince corporations to get out and hire more talent.

Because if companies continue to shed employees like a bad sunburn after a week at the beach, we may be in for a long dry spell before any of us get a much-needed vacation. What do you think?