Credit card debt in US set to hit $1 trillion
21 May 2016
Credit card debt is expected to hit $1 trillion in 2016, reveals data from the Federal Reserve.
This would be close to its all-time high of $1.02 trillion in July 2008, on the eve of the crisis, The Wall Street Journal reported.
Personal savings rate of US citizens at the time was 4.4 per cent, which increased to as high as 11 per cent in December 2012 and currently stood at 5.4 per cent.
In March, the total level of outstanding credit card debt increased to $951.6 billion, in part due to the steadier economy and improving job market, which encouraged consumer spending. Even auto loans are on the rise, even as consumer sentiment had rebounded.
But according to commentators, rising credit card balances could also be attributed to how banks were trying to do business in a low interest-rate environment that squeezed their profits.
Banks had been aggressively seeking more business via rewards points, and, troublingly, sub-prime borrowers.
According to data from Equifax, a US consumer credit reporting agency, lenders issued 10.6 million credit cards to subprime borrowers in 2015, up 25 per cent from the year prior and it was also the highest level since 2007.
Also, actual spending trend in the US was still a difficult call. Retail sales increased to their highest level in over a year in April, but according to the Journal there were signs that consumers were pulling back on non-essentials.
According to John Halterman, a certified wealth strategist and founder-owner of Beacon Wealth Management, "You know I think the reason why people take on debt is not because of the stability of our economy, but we're living in an instant-gratification-society and I think that because credit has been so easy people want things now and the thought of actually waiting until later is just not fathomable to a lot of people," said, radio station WDTV reported in its online edition.