WASHINGTON—As an improving economy spurs borrowing, a new study indicates consumers are again starting to rack up considerable credit card debt, and may be on a path to unsustainable monthly payments and a marked increase in defaults.
The just-released Q3 2014 Credit Card Debt Study from CardhHub suggests U.S. credit card performance has deteriorated on a year-over-year basis for four straight quarters, punctuated by a $15.94-billion increase during Q3 2014—the largest third quarter buildup in the past five years, with the exception of 2011. This represents a 35% increase over Q3 2013 and a 25% rise relative to Q3 2012, CardHub said.
“Furthermore, 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% over 2013,” stated CardHub.
The study shows that the average household’s credit card balance increased by $68 during the third quarter of 2014, and is now $6,870. CardHub expects that figure to reach $7,126 by the end of the year, bringing the U.S. to roughly $1,200 away from a tipping point at which minimum payments will become unsustainable and delinquencies will skyrocket.
“Consumer attitudes toward money have not improved since the Great Recession . . . As a result, consumers must strive to remember the corrosive impact of debt on household finances during the recession and work to get out from under its influence before the burden becomes unbearable again,” stated CardHub.
For the first time in the past six years, consumers reversed almost the entirety of their standard first quarter paydown during the second quarter of the year, the study reveals. “More specifically, the $28.5 billion in credit card debt that incurred during the second quarter of the year wipes out more than 86% of the $32.5 billion paid off with the aid of tax refunds and annual salary bonuses from January through March,” CardHub explained.
This year’s second quarter increase was 46% higher than the next highest Q2 debt buildup (recorded in 2011) and nearly 200% higher than the increase witnessed in Q2 2009, when the country’s economy was just emerging from the Great Recession.
CardHub projects that consumers will charge-off $30.35 billion in credit card debt during 2014. If that projection holds true, consumers will have defaulted on $298.5 billion in credit card debt since 2009.
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