Credit Card Debt Reaching "Unsustainable" Levels
According to a new report, America may be reaching an “unsustainable” level of credit card debt in the coming years. The report predicts a net increase of $68.5 billion in credit card debt from 2014 to 2015, despite promising payoff statistics earlier in the year.
The average household credit card balance is expected to reach $8,000 by the end of the fourth quarter, which is just $400 below what experts claim is an unsustainable level of debt. In other words, the amount of debt that households are acquiring is outpacing their increased income, which could make it impossible for consumers to keep up with their credit cards in the near future.
There was hope in the first quarter of 2015, with Americans paying off nearly $35 billion in credit card debt. That hope was quickly dashed as consumers added $32 billion in debt during the second quarter and over $21 billion in debt in the third quarter. Those are the largest second and third quarter increases since 2009.
This trend of paying off debts in the first quarter has been consistent for several years, so America may alleviate some of its newly acquired debt during the first quarter of 2016. However, if consumers do not get a handle on their credit card balances soon, the country may end up in a worse financial situation than it was after the 2008 recession.