Georgia cities lead the nation in credit card debt

 

The reason for the founding of Georgia, the United States’ thirteenth and final original colony, is unclear.  Some say that the state was founded for and settled by debtors. However, the truth is that Georgia’s founder, James Oglethorpe, only proposed this idea.  After a charter for the colony was approved by King George II in 1732, there were already enough people to settle the southern territory without debtors.

Fast forward about 279 years to today.  One would think that Georgia was indeed founded as a debtors colony and that the state's current denizens share their forefathers’ inclination to assume too much debt. 

According to new research released by Experian, one of the major U.S. credit bureaus, three Georgia cities are among the top 25 U.S. cities where consumers carried the most debt on their credit cards in December 2010.  They are Atlanta, Augusta, and Savannah, the very site where Oglethorpe chose to begin his settlement.  Despite a decrease from the previous year, debt amounts still remain relatively high.  Atlanta’s average bank credit card debt is $4,690; August is $4,575; and Savannah is $4,570.

James Oglethorpe, moved by witnessing first-hand the atrocities of debtors prison in London, dreamed of starting an American colony that gave debtors a chance to start anew. It did not happen quite as he planned.  Nevertheless, now that Georgia cities lead the nation in credit card debt, it seems as if Oglethorpe’s dream did come true, but with an ironic twist.

Read the list of the 25 top cities with the most credit card debt at CNNmoney.com.

Fitch: Credit card write-downs to continue falling

Tighter underwriting, better customer payment habits and "a substantial cleansing" of past-due accounts helped drive improvements in bank credit card portfolios during the third quarter, Fitch Ratings said Wednesday.

In a review of quarterly results for the major credit card issuers, the agency noted that four large banks have written off 14 percent or more...

Read more about this as reported by Bloomberg Businessweek.

The U.S. is closer to losing its top credit rating

Last year in April, I wrote an article poking fun at the irony of Berkshire Hathaway, Warren Buffet’s company, losing its high credit rating.  (“Warren Buffet’s credit rating reduced”).  Fast forward almost one year from that date, and here I am, writing about the real possibility that the United States of America, the country whose government-issued securities are as good as cold cash, is facing the same situation. 

In today’s The New York Times, Moody’s Investors Service, a popular credit rating agency, delivered the bad news.  Ironically, Moody’s is one of the widely used credit agencies still under fire for erroneously rating many of those toxic assets that wreaked so much havoc on global economies. 

Why is the country’s rating in jeopardy?  This looming demotion is no different than a credit downgrade for a consumer whose debt-to-income ratio has gone through the roof. (Of course if he still has a roof). According to The New York Times, the soaring amount of U.S. debt is staggering:

“The administration of President Barack Obama estimates that the U.S. deficit will rise to 10.6 percent of gross domestic product in the current fiscal year, the highest since 1946, and federal debt will reach 64 percent of G.D.P. Government expenditures are expected to rise to a postwar high of 25.4 percent of G.D.P.”

However, there is hope. Mr. Cailleteau, managing director of sovereign risk at Moody’s, says:

“For now, the U.S. debt remains affordable, Moody’s said, as the ratio of interest payments to revenue fell to 8.7 percent in the current year, after peaking at 10 percent two years ago. If that trend were to reverse, the Moody’s analysts said, “there would at some point be downward pressure on the Aaa rating of the federal government.”

If the credit rating of the U.S. were downgraded, the country’s default risk would increase.  In other words, that would mean higher interest rates that the government would have to pay to borrow. Who would be paying for that increased risk, at least in part? You and I.

In short, the downgrade is highly unlikely. Just because we are “substantially closer” does not mean we are close.  But, it is always nice to know that consumers are not the only ones suffering with credit problems.  That feeling of empathy would be short-lived, I suppose, because we as tax payers would get the short end of the stick.

[ Read The New York Times article. ]