Debt from credit cards and car loans in the United States stood at a record $2.05 trillion in September, and has continued to rise since then. That’s an average of $7,296 per U.S resident. Four years ago, the figure was $1.52 trillion.

This year’s annual Credit Card Survey, conducted by Myvesta, a nonprofit consumer organization, says the average credit card debt carried by individuals has risen 14.5 percent—an average of $2,627 per person. “When people are pulling out the plastic to make everyday purchases such as hamburgers and groceries, it’s no surprise that the average amount of debt has gone up,” said Myvesta spokesman Jim Tehan.

Part of the ballooning in paper values that’s a sign of the accelerating capitalist economic crisis, is the rise of home mortgages taken on by workers and the middle class—not so much to buy houses but to secure refinancing to go deeper into debt to meet other expenses. Over the Christmas holidays, for example, millions of people will use home equity loans to purchase gifts and for travel to visit family, according to the Seattle Post Intelligencer.

“The logic of borrowing at 3 percent to 7 percent on a home equity loan compared to 13 percent on a credit card is too powerful to ignore,” said Kenneth Posner, a Morgan Stanley investment bank analyst, according to the December 13 Business Week.

The reason for this is that since 1995 home prices have risen much faster than inflation. This year, even with interest rates rising, the housing bubble has continued to inflate. Home prices rose 40 percent faster than the overall rate of inflation over the previous eight years. According to Business Week, outstanding home equity loans now stand at $460 billion, having more than doubled in just three years. That’s more than four times the entire foreign debt of Argentina when it defaulted on $100 billion in loans in December 2001.

At the same time, homeowners’ equity in their houses—that is, the portion of the current market value of a home that’s been paid off to the bank—was at an all-time low, having fallen to 55 percent of the market value of the home in mid-2004 from a high of 84 percent in 1945; the average over those six decades was 67 percent.

Myvesta’s Tehan warned that while home equity loans provide temporary relief “the equity will dry up and the debts will need to be paid off.”

Even a 10 percent drop in housing prices would wipe out well over a trillion dollars in assets corresponding to paper values of homes. There’s already a rise in bank foreclosures on families that can’t keep up with the payments.

As of the end of 2003, household debt had risen to 83 percent of the U.S. gross domestic product from 70 percent in 1999. More than 13 percent of household income went toward paying interest and principal on those debts. Under the combined pressures of mortgage and other personal debt, 1.6 million individuals in the United States filed for bankruptcy in 2003, nearly twice the number a decade earlier.

After a spate of personal debt bankruptcy filings in the mid-to-late 1990s, banks issuing credit cards started a practice called universal default. If the bank found out you were late in paying your utility or phone bill you would be deemed a “credit risk” and your interest rate raised.

The credit card business is now the most lucrative sector of banking, according to a report done jointly by the New York Times and the Public Broadcasting Service. To offset competition from home equity lenders, credit card companies are raising interest rates and imposing wider ranging fees.

Fixed rates have been replaced by “variable rates” that can be changed at any time without prior notice to the card holder or any requirement to give a reason for the rate increase, Business Week reported. In the last eight years, the major credit card companies have increased the penalty for being even one hour late with a payment to an average of $39, from the previous $10 or less.  
 
 
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