Consumers Pick Up the Pace on Credit Card Charging
Mar 14th, 2012 @ 7:49 PM by Amber Nelson
American consumers are turning back to credit cards in full force, according to new data from credit card comparison website CardHub, indicating that there never truly was a downward trend in credit card spending.
The website says that during 2011, consumers charged $48 billion in new credit card debt. That is 424 percent more than 2010 charges and 577 percent more than 2009 totals. That number is made up of $4 billion in total outstanding credit as well as $44.2 billion in consumer credit card defaults.
“Looking back two years, with the exception of a single quarter, U.S. consumer debt management has consistently worsened,” the report said, as quoted in the Chicago Tribune. “First-quarter pay-downs have become less significant and the amount of new debt added in each subsequent quarter has grown compared to its respective counterparts in the previous two years.”
It is important to note that much of the decline in credit card debt during the two previous years was due to card issuers writing off seriously delinquent debts they didn’t believe would be repaid.
“Card issuers were very aggressive in writing off bad debt in 2009 and 2010,” said Greg McBride, senior financial analyst at Bankrate.com. “That’s why over the last year or so they’ve been out actively seeking to grow their business.”
And a large portion of the new spending may be a result of Americans being attractive to lucrative credit card rewards, not necessarily just to consumers who cannot afford their monthly expenses.
“There’s a lot of competition on rewards credit cards to attract big spending consumers,” said McBride. “These are consumers that by and large pay their balances in full every month, so people are spending a lot more on credit cards, but it doesn’t necessarily mean they are carrying bigger balances or accumulating more debt.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.