Are American consumers supremely confident or financially foolish? Credit card balances may top $1 trillion for the first time since 2008, which would be a net increase of about $80 billion for 2016. That’s a trend personal finance site WalletHub calls “very ominous.”
Indeed, consumers added a record $34.4 billion in credit card debt in 2016’s second quarter alone, the second-largest increase for that period since 1986. They added $71 billion to their credit card bills last year, the most since 2007. As a result, WalletHub says the average debt level per household will hit $8,500.
To make matters worse, consumers, paid down just $27.5 billion in credit card debt during the first quarter, the lowest first-quarter pay-down since 2008.
“As a result, it’s not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get,” WalletHub said in a report issued Monday.
Are American consumers supremely confident or financially foolish? Credit card balances may top $1 trillion for the first time since 2008, which would be a net increase of about $80 billion for 2016. That’s a trend personal finance site WalletHub calls “very ominous.”
Indeed, consumers added a record $34.4 billion in credit card debt in 2016’s second quarter alone, the second-largest increase for that period since 1986. They added $71 billion to their credit card bills last year, the most since 2007. As a result, WalletHub says the average debt level per household will hit $8,500.
To make matters worse, consumers, paid down just $27.5 billion in credit card debt during the first quarter, the lowest first-quarter pay-down since 2008.
“As a result, it’s not a question of whether consumers are weakening financially, but rather how long this trend toward pre-recession habits will last and just how bad it will get,” WalletHub said in a report issued Monday.
“Right now issuers know that consumer confidence is very high,” said WalletHub analyst Jill Gonzales. “Consumers are hungry for new cards. [Issuers] are offering these very lucrative incentives and APR rates.”
Economist Scott Hoyt of Moody’s Analytics, however, isn’t ready to hit the panic button yet, noting that credit card debt remains below where it was in the years running up to the recession.
“We certainly see the same trend, but what you’re looking at is a growth rate that’s coming off a fairly small base because of the reduction in debt that took place during and after the recession,” he said.
Moreover, credit card debt outstanding relative to either nonauto and consumer spending remains low, according to Hoyt, who added that consumers these days have better capacity to handle the higher debt.
“We could do this for a couple of years,” he said, “before we started getting to levels that we would find concerning.”
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