Credit Card Debt Now at $1 Trillion

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Credit-card debt breached the $1 trillion threshold in the U.S., joining auto loans and student debt in crossing that level, and hitting its highest mark since the nation’s last recession.

New data from the Federal Reserve shows the new growth of household debt. There is a rise in borrowing, however, that is a good sign for the U.S. economy. This is a sign that consumers are spending money big ticket items such as cars while smaller items are being charged to their credit cards.

As per the Federal Reserve states that for December the credit card debtlevek is $1.0001 trillion. For December the Fed reported $998.9 billion. With the February data pushing the debt in to the trillion mark that makes credit cards the third consumer lending category. Auto loans and student loans lead the race before credit cards.

The latest number placement reflects changes in the economy. Simply put, borrowing is up. In particular auto and student loans have gained better footing. The housing bubble burst also had much to do with it despite the downturn and crisis. 

Now economists wonder how long will the bullish streak last. Economists are looking closely at the upside down nature of how consumers will be able to afford their new debts. It is also of concern because there are signs that unemployment will rise soon. For now though, consumers are paying their debts on time.
“The situation for the consumer is positive right now, but…there are always risks associated with accumulating debt,” said Dana Peterson, economist at Citi Research. “Rising interest rates will increase those risks over time.”

In the credit card market there is broadcast of some gloom. The credit card market is seeing more consumers miss payments. Thew rise in interest rates is the challenge. The variable interest rates pose risks. E Fed has implemented three interest rate increases since 2015. If the Fed continues to raise the rates consumers will be faced with paying larger monthly payments. 

If delinqumencies were to rise due to rising rates, then the economy would slow down. The U.S. economy would slow down in consumption and the bounce back would not be swift.

“We don’t have the flexibility to do the kind of stimulus we did in 2008-09,” noted Robert Shiller, a Nobel-Prize winning economist. “And we’ve raised the national debt to a much higher level.”

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