Credit Card Debt Soars At Highest Rate In 5 Years For U.S. Households

Credit card debt for U.S. households in 2013 swelled at the fastest rate since the start of the 2008 recession, but whether Americans’ renewed willingness to put purchases on plastic is a good sign or a bad one for the U.S. economy is a question that confuses even the economists who study the numbers for a living.

For the households taking on new credit card debt, however, there is sure to be trouble ahead.

The total credit card debt of American consumers last year inflated to a staggering $856.5 billion, according to a recent report by the Federal Reserve. Just as a point of comparison, the American Recovery and Reinvestment Act of 2009, better known as the “stimulus” package, allocated $787 billion toward pulling the country out if its then-spiraling economic crisis.

The amount of household credit card debt also far exceeds the U.S. military budget for 2014, which is set at $671.9 billion.

Credit card debt rose 1.3 percent in 2013. In 2012 and 2011 it rose less than one percent, and fell precipitously in the two years before that.

The average amount of credit card debt per American household, as of the end of last year, stands at $7,115. However, it should be noted that the figure is pushed higher by a smaller number of households that have taken on crippling levels of debt.

For all indebted households, the average credit card debt total is more than twice that for all households — $15,252.

The question is, why are Americans now taking on such extraordinary levels of revolving credit card debt? A recent poll showed that only 51 percent of Americans say they have more in emergency savings than they have in credit card debt, while 28 percent say that what they owe on plastic is more than the total amount of money they have saved, if any.

People between the ages of 30 and 64 are especially debt prone. That group represents the largest segment of Americans with more debt than savings.

“This is a reflection of the stagnant incomes, long-term unemployment and high household expenses that are hampering the financial progress of many Americans,” said Greg McBride of Bakrate.com, which conducted the survey.

While some analysts say that the rise in credit card borrowing reflects a renewed optimism about the U.S. economy — most of the new credit card debt comes from people with better-than-average credit scores — others aren’t so sure.

“The problem is you’re not seeing job growth; you’re not seeing wage growth,” said David Strasser, analyst at Janney Montgomery Scott. “We’re still overleveraged by any historical measure.”

So, is the increase in credit card borrowing a good sign or a bad sign. Not even the Federal Reserve is sure.

“Good or bad, it’s hard to say,” shrugged Wilbert van der Klaauw, senior vice president and economist at the New York Federal Reserve, which put together the credit card debt report.

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