Welcome to the Unsecured Credit Bubble

Can we admit we’re in an unsecured credit bubble yet?

Here’s a shot of all of the offers I received over the week of New Year’s in the mail. This is a fairly typical week:

  • Amex – Year of Amazon Prime + $20,000 points
  • Citi – 0% on Balance Transfers & Purchases for 15 months
  • GM BuyPower Card: 0% APR on purchases for 12 months
  • Discover: 0% APR for 18 months on Balance Transfers or $0 Balance Transfer fee

Granted, I have pretty good credit – a score of around the mid-700s.  But I receive non-stop offers for credit despite having nearly as much unsecured credit available to me as my annual salary; more than half of the credit required to pay off more than half of my house.  And I still get additional offers!

Even someone I know who had to deal with collections agencies in the last 5 years (including balance write-offs) receives multiple credit card offers each week as well.  I think we’re witnessing the peak of the unsecured credit bubble.  It is complete insanity.

Used responsibly, however, I’ll gladly take money from someone offering me an effectively free short-term loan (“I’ll gladly pay you tomorrow for a hamburger today.”).  But ultimately, one has to be responsible with their use of credit and make sure there is a payment plan setup to pay off the balances before the begin accruing interest; typically American’s aren’t very good at this part of things, which is what the credit card companies are banking on.

However, if too many Americans take these offers and take them too far, we could see an implosion of consumer credit as these offers expire (especially if rates have risen 18 months from now).  It could get REALLY ugly for the American consumer that drives ~70% of the U.S. economy in about 2 years from now.  Perhaps I’ll start looking into buying some puts on credit card and financial companies 2-ish years out…

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