Economic turnarounds usually motivate American consumers to spend more. The end of the Great Recession of 2008 was no different from other recoveries. The good news is that buying habits are reverting to pre-recession levels. The more troubling news is that purchases are being put on plastic.
Credit card debt is growing at record levels. Yet, consumers are not paying off balances each month. Making the minimum monthly installments may is actually weakening them as the economy tries to gain strength.
Last year ended with the largest fourth-quarter credit card debt increase since 2007 and the third largest in the last 30 years. Within a three-month span, balances nationwide reached $60.4 billion, nearly 54% above the post-Great Recession average. Of that amount, $21.9 billion represented new debt.
Those milestones followed a record-setting second quarter that saw $34.4 billion in new credit card debt. A more troubling trend reveals that while those “swipes” were at their highest during that quarter, pay-down of debt was at its lowest since 2008: $27.5 billion.
The net increase for all of 2016 ballooned to $89.2 billion, the most credit card debt since 2007, bringing current levels to its highest point since 2008.
Simply stated, consumers now owe exactly as much as they did prior to the start of the Great Recession.
WalletHub is projecting that “charging it” will continue. They also predict that outstanding balances in 2017 will break a new record: $100 billion.
Strategies exist to minimize the economical impact of growing credit card debt. Options include transferring high-interest balances to cards with introductory periods of 0% interest. They can also pay more than the required minimum installment, if not the entire balance.
More extreme credit card debt that finds an account holder living beyond their means may require relief through a bankruptcy filing.