Credit Card Balances Rise for 4 Straight Quarters, But Charge-Off Rate Low at 2.89%

Credit Card Balances Rise for 4 Straight Quarters, But Charge-Off Rate Low at 2.89%Consumers’ credit card habits are sliding into deeper debt again, after a significant pullback that followed the Great Recession and financial crisis.
CardHub reports that credit card balances have surged on a year-over-year basis for four straight quarters, with a $15.94 billion increase during the third quarter of 2014. This represents a 35 percent increase over the third quarter of 2013, and a 25 percent rise compared to the third quarter of 2012.
It is also the largest third quarter build-up in the past five years, with the exception of 2011.
“We now project that U.S. consumers will incur a total of more than $60 billion in new credit card debt by the end of 2014, which would be an increase of at least 55 percent over 2013,” CardHub states.
There is some positive news: The credit card charge-off rate, at 2.89 percent, is lower than it has been since 1985.

This means that more people have jobs and a steady income to avoid falling behind on their payments. But the dark side is that the lessons learned since the Great Recession may be fading away as consumers accumulate greater balances owed from plastic.
The consumer debt picture has now worsened on a year-over-year basis for four straight quarters.
The average household’s credit card balance increased by $68 during the third quarter of 2014, and is now $6,870, CardHub reports.
“We expect this figure to reach $7,126 by the end of the year, bringing us roughly $1,200 away from a tipping point at which minimum payments will become unsustainable and delinquencies will skyrocket,” CardHub said.

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