Trends in U.S. household credit-card debt sometimes get overlooked in the grander scheme of the economic recovery, but they have a major impact on the future spending habits of U.S. consumers.
And credit card trends are not looking as good as they were two to three years ago. In fact, Americans racked up a whopping $32.1 billion in new balances from April through June – the largest second quarter surge since CardHub.com began quarterly tracking of credit card debt in 2009.
It was a bit of a surprise since households had managed a credit card balances drawdown of nearly $35 billion in during the first quarter of the year. But by the end of the second quarter, all of the drawdown was erased.
As a result, CardHub now projects that Americans will end 2015 with a net increase of more than $60 billion in credit card debt – “putting us perilously close to a tipping point at which balances become unsustainable and delinquency rates skyrocket.”
With 7 of the past ten quarters reflecting year-over-year worsening consumer performance, evidence seems to confirm that U.S. credit card users “are reverting to pre-downturn bad habits,” CardHub adds.
CardHub projects that card debt will cross $900 billion by the end of the year, bringing the average indebted household’s balance to $7,813 — the highest amount since the Great Recession and $615 below the tipping point CardHub identified as being unsustainable.
There is a bright spot: charge-off rates remain near historical lows and are, in fact, down on a year-over-year basis.
Consumers tend to incur less credit card debt in the third quarter of the year than in the second, before spending spikes during the fourth quarter.
“Just how bad this year will be for our wallets may thus depend on how flush we’re feeling during the busy holiday shopping season,” CardHub says.