The Federal Reserve reported late Wednesday that revolving debt, mostly from credit cards, dipped at an annual rate of 13.1 percent in August 2009. Almost $10 billion in credit card accounts outstanding were wiped off of banks’ books in the month. This, according to industry source InsideARM.
On the fact it may sound as if Americans are no longer as deeply in debt as before. But that reduction means very little given that fact that it factors in only those accounts that have not been charged off. In other words, once an account is charged off it’s no longer counted.
More accounts charged off means that fewer accounts are shown as being in default. Nifty accounting trick, huh?
On the flip side, bankruptcy filings continue to roar past 2005 highs. New Yorkers as well as consumers from around the country are filing for bankruptcy to combat aggressive debt collectors, uninsured medical costs, job losses, and the continuing surge of foreclosures.
So in the end, some accounting tricks don’t mean a thing.
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