It’s 2005 all over again (that’s the second time today).
With the Federal Reserve-manipulated boom fully entrenched in the United States economy, consumers are borrowing again and racking up obscene amounts of credit card debt. With easy access to credit and the need to keep up with the Joneses (or because they live paycheck to paycheck), U.S. households are embracing debt like it was 2005.
After making some significant gains since the economic collapse, consumers have decided to accrue debt and not pay off their credit cards as much as they should. And this is resulting in an astronomical amount of debt by the end of 2016.
In fact, it’s projected credit card debt will top $1 trillion once we ring in the New Year.
CardHub released the results of a new study and discovered that U.S. consumers repaid only $26.8 billion in credit card debt during the first three months of 2016. This represents the smallest first-quarter pay down since the height of the financial crisis.
Here is an annual look at households’ debt load increase or decrease since 1986 (you’ll see consumers in 2015 added as much debt as they did in 2005):
Researchers argue that credit card users are going back to their old ways and embracing their horrid pre-recession habits. The average household credit card balance is $7,597 in the first quarter, which is a six percent increase from the same time a year ago.
The website notes that Q1 2016 can easily be compared to the first quarter of 2007. Both quarters share a small pay-down amount, a high charge-off rate and the size of the previous quarter’s debt accumulation. This won’t bode well for consumers or the national economy.
But isn’t this what government and central bank policymakers wanted in the first place? More people to spend money and go into debt.
I for one, have gone on a credit card diet, paying down credit card debt by $500 per month. Just got approved for 2 zero interest for 12 months credit cards, after balance transfers I will save $300 in interest. I should be debt free in 20 months. I just love to see the balance drop every month.
The growth in credit card debt is just one more sign that the economy is not doing as good as the FED and Government bean counters are predicting. Recession 2017???
Very few are saving for anything. When you can service CC debt with 20% or less of your monthly income, who can blame them. If the SHTF they know they can still dump the unsecured CC debt through bankruptcy or just take a hit on their credit score for a few years.