Credit Card Debt Forecast Signals Ominous Warnings to Consumers

Yet after a disappointing first quarter, Americans are expected to end the year with nearly $47 billion in new credit card debt to add to the roughly $82 billion incurred during 2011 and 2012 combined. So, where do we go from here? There are a couple scenarios. We could continue to spend beyond our means until debt levels become unsustainable, charge-off rates bounce back from record lows, credit availability tightens and the economic recovery is put in jeopardy. Or, we can come to the realization pre-recession spending was buoyed by income levels affected by the housing bubble and readjust our perception of necessities, budgeting and paying off debt. Which would you prefer? Its pretty much a no-brainer, but that doesnt mean the process will be easy. Reining in spending requires making tough choices and breaking bad habits. However, the current credit card landscape lends itself to consumer improvement. More specifically, credit card offers with a zero introductory annual percentage rate are abundant and becoming increasingly attractive. According to data by, the average credit card offering zero percent interest on new purchases has an introductory rate of around 10 months 2.53 percent longer than offers that were on the market at the end of 2012. The same is true of the average zero percent balance transfer term on credit card offers. When considering the average indebted household owes a balance of $6,591, according to CardHubs 2013 credit card study, a middle-of-the-road balance transfer card could be worth as much as $1,000 in avoided fees and finance charges. High-end outliers can be worth even more. For example, the Slate Card from Chase offers zero percent interest rate for the first 15 months and charges neither an annual fee, nor a balance transfer fee. Suppose you have an average credit card balance and a card with a 17 percent interest rate. If you can afford to pay $275 per month to your credit card company, the Slate Card could help you climb out of debt in a quick fashion. However, transferring a balance to a credit card alone wont solve one’s debt problems. Consider these tips for getting your personal finance house in order and keeping it in shape moving forward: 1. Maximize your credit standing. Good credit cards on the market like the Slate Card from Chase require an applicant has an above-average credit score to qualify. Since some of these cards provide zero percent interest on new purchases for up to 18 months and hundreds of dollars in initial rewards bonuses, it pays to have good credit. You can estimate where you currently stand, but the credit-building process will be the same regardless of your starting point. The best approach is to open a credit card that has no annual fee and make on-time payments to get positive information flowing into your credit report on a monthly basis. 2. Build an emergency fund . Setting up a financial safety net should be a high priority. Without one, you may be a major emergency expense or an income disruption away from running into serious financial trouble even if you do manage to get debt-free. A number of experts recommend people have an emergency fund equal to their minimum monthly expenses times at least three months (preferably six months). You can work your way toward that goal by making incremental monthly deposits.
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Debt crisis shrinks international use of euro

PDT 0 comments FILE – In this May 10, 2006 file photo a one euro coin is seen on a one dollar note in Frankfurt, central Germany. The European Central Bank says Tuesday, July 2, 2013, international use of the euro slipped last year because of the debt crisis among countries that use it. The euro’s share among the currency reserves held by central banks fell from 25.1 percent to 23.9 percent in 2012. Meanwhile, countries held more reserves in currencies of nations with strong economies, such as Australia and Canada. (MICHAEL PROBST, FILE/AP Photo) FRANKFURT, Germany International use of the euro slipped last year because of the debt crisis in Europe, but the U.S. dollar held its own as the world’s leading currency for reserves held by central banks. Currencies not traditionally used as reserves, such as the Canadian and Australian dollars, gained in favor as those countries enjoyed steady growth and lower debt than major economies. The European Central bank said Tuesday that the euro’s share among the currency reserves held globally by central banks fell to 23.9 percent in 2012 from 25.1 percent the previous year. The dollar’s share was little changed at 61.9 percent. The ECB said the financial crisis that has afflicted the 17-country eurozone was a factor discouraging use of the euro for reserves, which are often held in the form of government bonds. Lending across borders in the eurozone has dropped, diminishing the liquidity that reserve holders like to see. Lower liquidity means there are fewer buyers and sellers readily found. The eurozone countries have struggled with heavy levels of public debt – Greece, Portugal, Ireland and Cyprus have needed financial rescue and even large economies like Spain and Italy have worryingly high debt. Concern over that debt eased only after the European Central Bank came up with a plan to buy the government bonds issued by countries that promise to reform. In its annual report on international use of the euro, the ECB also found that there was less borrowing in euros internationally by companies because they could get lower interest rates by selling bonds denominated in U.S. dollars. Countries hold reserves of foreign currency so they can influence their own currencies’ exchange rates in case they rise or fall too rapidly. They can do this by buying or selling currencies on foreign exchange markets.
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Jefferson County Files to End Bankruptcy, Adjust Debt

As of March, it hit $764 billion, up from $736 billion in February, the State Administration of Foreign Exchange said on its website on Friday. Outstanding short-term foreign debt, due within one year, rose to $565.68 billion from $540.93 billion at the end of last year. The country has over $3 trillion in cash reserves. More than enough to service its borrowing or wipe it out entirely and still have a few trillion left over for a rainy day. China is not a large overseas borrower, but is seen increasing its use of foreign capital markets in the years ahead as the economy matures. By comparison, the U.S. total debt obligations are over $17 trillion. It is unclear exactly what are Chinas overall debt obligations. Investors have bee mildly concerned over Chinas debt levels, from federal to municipal to corporate debt. This year, for the first time ever, a Chinese solar company defaulted on a $531 million debt. Suntech Power is now in bankruptcy protection. Over the last week, China investors got another scare with the Peoples Bank of China Bank of China , their central bank, said it would not be helping out small to mid-sized lenders who took on too much credit risk. The market panicked. Stocks fell. And then the Bank said that it would indeed help with liquidity where needed, and has even offered banks some cash protection over the last forty eight hours, according to published reports quoting Central Banker Zhou Xiaochuan . On Saturday, the Chinese Banking Regulatory Commission smoothed over the liquidity crunch concerns when it added its voice to the chorus and said that there was adequate reserves set aside at banks to cover problems with non-performing loans. Commission chairman Shang Fulin said the recent liquidity crisis which sent money market rates soaring to 11% in a country used to rates around 3% would not affect the stable operation of Chinese banks. He acknowledged that some banks needed to improve their liquidity and risk management and promised to strengthen regulation for wealth management products and commercial banks. He urged banks to improve transparency of the wealth management products being offered, which suggests an ongoing concern in the capital city with municipal level shadow banking and investment that invests pension fund money into government pet projects and assets that have zero return. All is clearly not well in debt solutions China banking. But many close China watchers at banks like Barclays Barclays Capital believe the country can weather this. They have faith in China regulators and Beijing leaders to keep financial problems under control. Huang Yiping, chief economist for Barclays in China, described the economic policy framework of Premier Li Keqiang as no stimulus, de-leveragingand structural reform. These are key components of what Huang calls Li-Economics. We think Li- Economics is exactly what China needs to put its economy on a sustainable path, which we estimate is around 6 to 8 percent annual growth for the next 10 years, Huang said during the Global Think Tank Summit in Beijing this week. China has resisted calls for more stimulus. The markets have been betting on it and never got it.
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China Foreign Debt Approaches $1 Trillion

municipal bankruptcy later this year by cutting $1.2 billion in principal payments to investors holding defaulted sewer-related debt. Less than $100 million of the countys $4.2 billion in debt will be paid with no changes to the terms of the original lending documents. Sewer warrant holder JPMorgan Chase & Co. (JPM) will collect 31 percent of what it is owed, while some general obligation bondholders will lose the right to collect penalty fees and a higher, default interest rate. The sewer warrant reductions mark the first time U.S. investors holding municipal debt have been forced as part of a bankruptcy case to take losses on the principal owed to them. The plan solves both of the problems that prompted the commission to file the largest Chapter 9 bankruptcy case, Jefferson County Commissioner David Carrington said yesterday in an e-mailed statement. In addition to struggling with the sewer debt, the county missed payments on general-obligation bonds backed by taxes. The plan is based on a settlement announced last month that included JPMorgan, seven hedge funds and a group of bond insurers, which together hold about $2.4 billion of the debt. The group will split about $1.84 billion, with JPMorgan taking the biggest cuts, collecting $375 million of the $1.22 billion it is owed, according to the plan filed yesterday in U.S. Bankruptcy Court in Birmingham, Alabama. Sewer Fees None of the countys more than $3 billion in sewer-related warrants will be fully repaid, with most, except for JPMorgan, getting back about 80 cents on the dollar. That debt is tied to sewer fees that havent been high enough to cover the interest and principal payments. Even some creditors being fully repaid with their normal interest rate were affected by the bankruptcy. Under the proposal, school warrant holders owed about $720 million were classified as impaired because they would see minor changes to the terms of their agreements. General obligation bondholders owed more than $100 million would give up the right to collect penalties and so-called post-petition interest triggered by the countys bankruptcy. About $95 million in general obligation bonds are considered unimpaired, which means they wouldnt see any change in their rights under the proposed plan. 18 Months The settlement ended more than 18 months of bankruptcy court battles between the county and its biggest creditors over how much the jurisdiction can afford to pay on more than $3 billion it borrowed to expand and improve the countys sewage system. By filing its so-called plan of adjustment, the county begins a process designed to end in November, when U.S. Bankruptcy Judge Thomas Bennett will hold a hearing on whether to approve the proposal. Bennett will consider the plan after creditors who arent part of the settlement have a chance to object. The county asked Bennett to hold a hearing Aug.
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