US Credit Card Debt Surges To New Highs At Almost $900 Billion In Over A Decade | Credit Raters

US Credit Card Debt Surges To New Highs At Almost $900 Billion In Over A Decade

29 Oct 2019
Approx Reading time: 3 minutes

At the end of last year, the US credit card debt was around $900 billion which was the largest ever. According to the Federal Reserve data, credit card balances increased by almost $26 billion from the previous quarter.

Credit card debt shoots to new levels in over a decade

The Federal Reserve indicates that although the increase in balances is synonymous with seasonal patterns it is nonetheless the first time they have hit such levels. This is higher relative to 2008 just before the cash crunch debt peaked at around $792 billion.

Americans owed around $793 at the end of last year on general-purpose credit cards such as American Express, Visa and MasterCard. Private label cards such as Kohl's, Macy's and Pier 1 Imports among others owed around $91 billion. However, according to the Consumer Financial Protection Bureau, this may not be a situation that may cause alarm. There more than meets the eye.

Also Read: Why Are Credit Reports Useful?

There are over 480 million credits in circulation in the US which is 100 million more since the 2008 recession. By December 2018 credits card debt ranked fourth in the US in terms of consumer debt. Mortgages, car loans, and student loans were the only segments with more debt than credit cards. However, the growth in credit debt was rapid relative to the other categories.

Consumers with high credit scores incurring more debt

Super prime and prime credit cardholders were the ones creating more debt. Different lenders have different ways of determining the super-prime and prime ratings. Credit scores usually range between 300 and 850 and according to prime ratings usually, lie between 740 and 799. On the other hand, the super-prime rating is between 800 and 850. Lenders usually consider these two categories as low-risk borrowers. As a result, they can easily access credit at low-interest rates and the best terms.

Even though consumers with high credit scores form a significant percentage of spending low credit scores are equally spending more. According to then CFPB there is an increase in the number of consumers with low credit scores holding cards racking up debt.

Interestingly the average debt has grown rapidly among individuals with low credit scores recently relative to those with high scores. However, that should not ring bells considering the cumulative credit card debt in individuals with low scores is still less than the 2008 figure.

Americans not shier about spending

The spending exudes consumer confidence whereby consumers consider the economy to be on the right path and jibs are secure. Concerns only come when there is uncertainty regarding the jobs which may dent prospects of repaying the debt. As a result, consumers will tend to freeze credit card spending.

Americans seem to be okay about their finances despite the slowdown in manufacturing and the looming recession. The US has experienced the longest economic expansion in history and the tariff war with China might have not affected Americans as such. Therefore credit card spending will continue as long as the conditions remain favorable.

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Rebecca White

Rebecca White is chief editor at Rebecca has an extensive amount of knowledge on financial subjects including short-term loans & debt consolidation in the UK and USA. Rebecca has wrote for many publishers such as Debt Secret, My Money, VL and more.