Economy

Americans Are Racking Up Credit Card Debt at a Jaw-Dropping Rate

After years of reining in credit card spending, Americans are saying "charge it" more than ever.

Photo Credit: Shutterstock / nenetus

Americans have more credit card debt than the citizens of any other country. As a nation, we’ve long been standouts among the international community in flexing our charge power, but recent leaps and bounds in spending place us far ahead of the pack. In 2015 alone, according to a CardHub study, we added an estimated $71 billion to our collective credit card debt total, surpassing expectations to reach a grand tally of $917.7 billion in funds due. A big contributor to that figure was fourth-quarter spending last year, which amounted to $52.4 billion. That’s an impressive amount of debt to rack up in just three months, particularly considering it nearly equals the credit debt accrued during the entirety of 2014.

Not since we headed into the Great Recession of 2008 have we been quite so loosey-goosey with our credit cards, racking up debt with stunning speed. Of our 4Q totals, CardHub notes, “during this one quarter, we added more debt than in 2009, 2010 and 2011 put together.” That brings dollars owed to credit card companies by each debt-saddled American family up to $7,879, the highest since the Great Recession.

Creditors—who are probably feeling pretty stoked right about now—won’t be getting that money in one lump sum, of course. Just 37.4 percent of credit card holders pay off their credit card bills month to month, while 17.3 percent pay whatever they can afford and 15.9 percent pay the minimum balance. That’s not surprising, considering a Bankrate.com survey from earlier this year found almost half of Americans, 48 percent, have more credit card debt than emergency savings.

For now, as CardHub notes, “charge-off rates remain near historical lows and are, in fact, down on a year-over-year basis.” But with interest rates rising—the Federal Reserve voted for a modest increase last December for the first time since 2006—it’s hard to know if that will remain true. According to the Fed, the mere .25 percent increase that kicked in late last year translates into a collective monthly increase of $192 million for consumers. CreditCards.com suggests we should expect rates to gradually keep going higher, likely by a full percentage point before year’s end.

Not to set off any alarmist bells, but there’s reason to be at least a little worried. As CardHub warns, “[W]e are now perilously close to a tipping point at which balances become unsustainable and delinquency rates skyrocket, which could lead to a considerable constriction in credit availability...Something clearly has to give, and it does not seem to be our spending habits.” (So much for not vigorously ringing those bells, I guess.)

As credit card debt levels rises, expect anxiety levels to follow suit. A 2015 survey from Prosper Marketplace found that 19.5 percent of Americans say their credit card debt causes more stress than their jobs; 9.9 percent find it more stressful than personal health issues; and 7.4 percent put it on par with the death of a relative. In exchange for having their credit card debt disappear, more than 10 percent of people would agree to be homeless for a year, nearly 5 percent would break off their current romantic relationship, and about 3 percent would lose an arm or a leg—literally. More than 8 percent of respondents said they’d listen to nothing but Nickelback for the rest of their lives, which proves their debt situations are pretty dire.

Check out more about people’s attitudes toward their credit card debt, via Prosper Marketplace, below. 

Age groups of respondents.

How people handle monthly credit card payments.

Things people would do to have their credit card debt forgiven. 

 

Kali Holloway is a senior writer and the associate editor of media and culture at AlterNet.

Stay Ahead of the Rest
Sign Up for AlterNet's Daily Newsletter
+ sign up for additional lists
[x]
Select additional lists by selecting the checkboxes below before clicking Subscribe:
Rights & Liberties
Education
Drugs
Economy
Environment
Labor
Food
World
Politics
Investigation
Personal Health
Water
Media