A new study by Standard & Poor’s reveals that the credit crunch is permeating consumers’ abilities to manage their personal debts. No guff!!
What is interesting however, is how this is playing out. Apparently credit cards are being used as a “source for cash” rather than a substitute for it – with 10% of Americans taking out more cash advances.
Obviously an act of desperation, but is it also futile? Cash advances are so costly that they will only exacerbate the situation.
If the smartest financial minds in Silicon Valley are demanding that their portfolio companies slash expenses by 25% – 50% (effectively raising internal capital), then isn’t it obvious that households should be doing the same?
Furthermore, according to the survey 35% of respondents prioritized their mortgage as the primary bill they would pay, opposed to 26% for their credit cards. While I understand that people do not want to lose their homes… thinking rationally, it makes *way* more sense to pay off a 20% loan than a 7% mortgage.