Credit Card Report
Financial News Made Easy

If you can get — and stay — out of debt, this is a good time to do so.

NEW YORK - The malaise in the mortgage market is starting to spread to credit-card and auto loans in what one analyst has dubbed consumer-credit “contagion.” It’s an ominous warning signal for the economy.

Many of the nation’s big banks and credit-card companies have begun acknowledging that they are seeing a shift in consumer behavior, including more people unable pay off their debts.

Things are unraveling faster than expected for some like Capital One Financial Corp., which on Tuesday boosted its estimates for credit losses next year to potentially above $5 billion, in part because of elevated delinquencies on its cards.

No one is calling this problem the next debt-related land mine yet, but it is still important to watch what happens, especially as the holiday shopping season gets under way.

Much attention has been paid in recent months to the collapse in housing prices and the upheaval in the mortgage market. The initial trigger was people with shaky credit, known as subprime borrowers, increasingly defaulting on their home loans.

An added complication was that many Americans used their homes as piggy banks in recent years.

When debt was cheap and easy to get and the value of their homes was surging, they borrowed against them. People used part of that cash to pay off other debts but mostly to fuel a spending surge on everything from flat-screen TVs to new cars to vacation homes.

That party seems to be over. Morgan Stanley analyst Betsey Graseck warns that an oncoming consumer-credit contagion could be ahead and uses that as the basis to downgrade her ratings on large banks to “cautious,” the lowest rating Morgan Stanley has on industries.

Among those on her watch list: Citigroup, Bank of America and Wells Fargo. She says there is already evidence that the subprime-mortgage implosion is affecting other areas, given that banks have tightened their lending to consumers. She expects more-stringent lending standards to put the squeeze on consumers at the same time unemployment rates are rising and housing values are falling.
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- Source: AP, via the Arizona Republic, Nov. 7, 2007

Getting yourself out of debt takes knowledge, will-power and determination. Once you decide to cut the credit habit, get yourself a coach who can both teach and motivate you: a book or two that gives step-by-step information on how to get out of debt. For instance:

The Get Out of Debt Kit: Your Roadmap to Total Financial Freedom

Book Description
Free Yourself from the Debt Trap!

Living beyond our means and financing unaffordable lifestyles on the back of credit cards has become synonymous with American consumer culture. Some consumers feel the nagging beginnings of problems, while others are nearly imprisoned by debt. No matter what your situation is, debt issues will drain you mentally, emotionally, physically, and financially. If you’re one of the tens of thousands of consumers who feels your debt might be out of control, here is help from someone who has walked the same road.

About the Author
Deborah McNaughton is the founder of Professional Credit Counselors and currently serves as spokesperson for Massachusetts-based The Debt Relief Clearing House, a placement service specializing in helping people with debts. Popular as a speaker and seminar presenter, she is the author of numerous bestselling books on credit and debt, including All About Credit and The Insider’s Guide to Managing Your Credit. McNaughton’s practical advice is regularly featured in national print and broadcast media, including Talk of the City (NPR), Your Money magazine, the New York Times, the Chicago Tribune, Parade, and Lifetime Television.