2017 American Credit Card Debt Hit 10-year High
Mar 29th, 2018 @ 8:36 AM by Amber Nelson
U.S. consumers added more charges to their credit cards last year than they have in over a decade, accord to a new survey by personal finance website WalletHub. And even though charge-offs rates remain low, reaching such lofty debt heights does not bode well for Americans.
Consumers added $92.2 billion in debt to their credit cards in 2017, the highest amount since 2007 and 105% above the post-Recession average. That pushed total U.S. credit card debt to just over $1 trillion last year for the first time ever. The average American household now carries $8600 in credit card debt, up 6% from the previous quarter. That new average is now higher than any quarter during the Great Recession and $138 more than WalletHub calculates to be sustainable.
WalletHub senior researcher Alina Comoreanu wrote, “Only four times in the past 30 years have we spent so much in a year. And in each of those prior cases, the charge-off rate – currently hovering near historical lows – rose the following year. There wasn’t nearly as much kindling on the fire, either.”
The increase in spending does reflect the rise in consumer confidence about the economy and their own finances and the rate of charge-offs – the credit card accounts that are considered so delinquent that they are uncollectable – is still near historical lows. That low rate is making it possible for credit card companies to continue to extend credit loans at a fast pace, but the delinquency rate did increase in the third quarter, a warning sign that banks and lenders may have to tighten credit in the near future.
“It’s not a question of whether consumers are weakening financially,” said Comoreanu, “but rather how long this trend toward pre-recession habits will last and just how bad it will get.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.