The banks are definitely showing that they are worried about consumers, inflation and rising interest rates.
For example, when it comes to consumer debt, banks are showing that they are increasingly concerned about the financial situation of their customers. A charge-off is an accounting term used by lenders and creditors to indicate that a debt has been written off as uncollectible. Meaning - the person paying the bill is BROKE. The creditor has given up trying to collect on the debt after the debtor has failed to make payments for an extended period of time - And we all know creditors don’t give up easily.
A charge-off is typically reported when a debtor has failed to make payments for 180 days or more. The creditor will then write off the debt as a loss and close the account, which will be reported as a charge-off on the debtor’s credit report. This negative item can stay on your credit report for up to seven years, making it difficult for you to get approved for new lines of credit or loans in the future. The increasing number of bank charge-offs is an indication that banks are worried about their customers’ financial situations and are taking steps to protect themselves from potential losses due to unpaid debts.
They think there is going to be a massive increase in in consumer defaults. This doesn’t bode well for the consumer. It also means banks are likely to be stingier with loans, credit cards…etc. It may be harder to buy things with credit over the next couple of years which will slow the overall economy.
It’s important to note that even though a debt may be charged off, you still owe it and are legally obligated to pay it back. The creditor may choose to sell the debt or hire a collection agency in order to recoup some of their losses, so it’s important that you stay aware of any attempts by creditors or collection agencies to collect on the debt. If you find yourself in this situation, it’s important that you take action quickly in order to avoid further damage being done to your credit score and financial health.
Tax season is here! During tax season, one of the most effective methods to keep your head down is to double check that your books are up to date and that your returns have been filed on time. The team at Vincere Tax can help you do just that! Speak with an advisor today.