American consumers are approaching the point where their growing credit card debt will be unsustainable and delinquency rates will skyrocket, says CardHub, the financial information resource on credit card usage and debt.
Americans piled up nearly as much new credit card debt in the fourth quarter as they did in all of 2014, according to a study released by the company. The increase in credit card debt was $57 billion in 2014 and $40 billion in 2013. This compares to $52 billion added in the fourth quarter alone.
The growth in credit card debt does not bode well for the economy or for consumers, the company says. Credit card debt statistics reflect consumer sentiment and can foretell overleveraging bubbles that may trigger constriction in credit markets, says CardHub.
“Although 2015 started with promise, as consumers used tax refunds and annual salary bonuses to repay nearly $35 billion in credit card debt over the year’s first three months, we quickly erased our gains with the largest second-, third- and fourth-quarter binges since CardHub began conducting this study in 2009,” CardHub says.
The year ended with a $71 billion net increase in credit card debt. “As a result, the average household with credit card debt now owes $7,879, and we 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," the company said. "All of this has us wondering: Is 2016 the next 2008 for credit markets?”
“With eight of the past 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits,” CardHub says.